From start-up to billion-dollar club
Geoff Metcalf interviews Silicon Valley entrepreneur T.J. Rodgers

By Geoff Metcalf

Along with being an entrepreneurial success in the Silicon Valley, T.J. Rodgers is a bit of an anomaly in the high-tech business world. After riding the ups and downs of running a start-up technology firm, 18 years later he is still on the job as the company's CEO. Under Rodgers' leadership, Cypress Semiconductor, a computer chip manufacturer, has grown to encompass the globe, enjoying over $1 billion in yearly sales.

WorldNetDaily writer and talk show host Geoff Metcalf recently interviewed Rodgers, described by Fortune Magazine as a "tough boss," about his company and his unusual staying power in the ever-changing technology industry.

Question: What is Cypress Semiconductor?

Answer: We're a chip company. We make chips for the communications industry -- the memory and logic chips that are building the Internet right now.

Q: The ones that keep getting smaller and smaller?

A: Moore's law says they get smaller by 30 percent every two years. When I started in the industry in 1975, we were struggling to make memory with 1,000 bits on it. Today, I'll sell you memory with 1,000,000 bits on it for four bucks.

Q: You've been in the business a long time and have seen a lot. You mentioned in a piece I read that your first exposure to boards of directors was in the '80s. You were a department manager?

A: Yup.

Q: How has it changed since you were that techie department head, managing maybe 100 people to being the man and having to interact and take the advice and counsel -- or ignore the advice and counsel -- of a board?

A: The first board I ever interacted with was at a company called American Microsystems, which almost doesn't exist. They just went private. It's a small company, and the board was sort of a ceremonial event. The big change when you go from a stodgy public company to a start-up is the people on your board are venture capitalists. They are there to help you for sure, but they are also there because they have invested in you. They want to guide the company and they want you to make money.

Q: And they are protecting their investments?

A: Absolutely. So, the advice has at times some hard edges on it. I was very fearful of my board when we first met. In the very first board meeting I had, one of the directors -- who is one of the toughest of the directors and who stayed with me for 14 years -- made a veiled threat that if I didn't perform, I'd be fired. As a matter of fact, it wasn't veiled.

Q: Sometimes they bluntly say, "Do it my way or the highway!"

A: He knew I had to do it my way -- because he didn't know how to do it -- and I did. But he asked me this question, he said, "T.J., should you be so lucky to be the president of Cypress five years from now (that would have been 1988), what is your vision of the company?" He didn't want me to vision what the company would be like. He wanted to tell me, in effect, that if the board wanted to fire me, I'd be gone. And I already knew that. Then we settled on working together and the board was one of the most positive influences in building the company that I ever had. I have had no lasting bad experiences with boards. And I like tough boards. I like boards that don't let me get away with stuff when I'm going in the wrong direction.

Q: The word around the Bay Area is you are a tough boss and that your board meetings are almost like an Ionesco play at times.

A: Absolutely. I was on the cover of Fortune one time as a "tough boss," and they didn't even know how to take a picture of a tough boss. They sent over a photographer and I said what you do is you just get your camera right up in my face and look right into my eyes. They had all these macho stances with three piece suits and stuff like that. I'm looking at the cover -- I had it framed. It's called "America's toughest bosses," and it has half of my face with a blue eye just kind of staring piercingly at you. I'm tough because I demand performance. But in Silicon Valley, people know that's the name of the game.

Q: So you either succeed or you perish?

A: Absolutely. They will stop giving you money and you go out of business. Meanwhile, the employees own 20 percent of Cypress. The company is worth $3 billion. A couple of months ago, it was worth $8 billion. Twenty percent of, say, $5 billion is a billion dollars. So, our employees made a billion bucks, or own a billion-dollar chunk of Cypress. They put pressure on each other much more than I put pressure on them to make the company succeed.

Q: You started it in '82. I know you went to one of the guys from Compaq. How did that happen?

A: Very strange. I was working at my second job with Advanced Microdevices for a classic entrepreneur, Jerry Sanders. He's the guy challenging Intel right now. I had given up because the Japanese were attacking the American industry. I tried to start a company in '79 and I couldn't get it done. I got a call from New York and the guy said, "I'm doing a reference check on these guys who want to start a company." I didn't give them a bad reference -- I was diplomatic. The business plan was ambitious and I said they could pull it off. But then I said to the guy, "If you've got money burning a hole in your pocket to start a semiconductor company, why don't you talk to me?"

Q: What did he say?

A: He said, "Fly out and see me." The guy's name was Stanley Fingerhood. So, I flew out there.

I told him I needed $40 million. He was a little-league venture capitalist and he said, "You have to meet my big-league friend Ben Rosen, Chairman of Compaq." So I met with Ben, and he said, "Gee, we just said in the New York Times we'd never invest in semiconductor companies, but you'd better fly down and see my partner, L.J. Seven, in Dallas." L.J. is a well-known Silicon Valley guy. I wrote my business plan in the airplane from New York to Dallas -- seven pages handwritten in pencil on quadro paper. I presented it to L.J., and his left-handed compliment was: "This is not nearly as screwed up as I thought it was going to be." He eventually became the chairman of the board of Cypress and funded our company.

Q: I have worked for small companies and I've worked for Disney. I know there is a different politic, a different culture in these different environments. Given that Cypress has made the transition from start-up to where you are at right now, how difficult has it been for you, your employees and particularly your relationship with the board?

A: With regard to the board, the bad thing about the venture guys is they leave you and go on to their next venture. But I have always managed to replace people on our board with businessmen who are senior to me who have been where I want to be.

Q: Give us an example.

A: For example, one of the five founders of National Semiconductor, Fred Bylick is on my board. Jack Lewis, the former CEO of Amdahl is on my board. Eric Benem, the CEO of 3Com is on my board. I pick outspoken people and I pick people who, when they don't think the company is doing the right thing, say it. So, I have avoided the transition to the ceremonial board. I still have a very active board and we still scream and holler at each other and pound on the table. That's because we all care. So, to me, that's very positive.

Q: What's it like after the IPO [Initial Public Offering]?

A: It's interesting. One of the reasons I've hung around for 18 years and not gotten bored is that the job changes so dramatically.

Q: You haven't gotten bored or fired?

A: I didn't get fired and, actually, I hope today their biggest worry would be that I would quit. But your job changes all the time and, therefore, even though you have the same title, and nominally the same position, you are doing totally different things.

Q: Such as?

A: When you start a company, you're a recruiter and a technologist. You try to get a product to the marketplace and that's all you think about. And the venture capitalists, as long as they can see progress in the right direction and believe in you, there is more money than you need, as long as you're willing to give up a large chunk of your company to get it. At the end of the day, after all the dilution, I ended up with 3 percent of the shares in Cypress.

Q: I interviewed a guy about three years ago, and I had never even heard this phrase before -- it was the title of his book: "Burn Rate." There is this whole idea that Silicon Valley companies anticipate huge losses before eventually getting that pot of gold at the end of the rainbow -- the IPO. When you guys got started, how much did you plan on losing?

A: This was 1983 dollars, so you could probably multiply it by two and a half -- 40 million bucks.

Q: So you figured you'd lose $40 million out of the gate?

A: Yes. The burn rate is a very simple graph. It's pretty straightforward. You graph the size of your bank account on a month-by-month basis. And, of course, every month you're paying people and you're paying rent. Your bank account goes down in a linear line. You extrapolate that line down to the origin when there are zero dollars left in the bank and, at that point in time, you better have a story that will get more funding.

So, in our case, they took the 40 million bucks and divided it into four parts and said, "Here's 10 million. Let's see if you can make your first chip." And I made it. Then they said, "Here's 10 more million. See if you can get the prototype into production in the factory where you are renting and buying wafers." And we did that. Then they gave us the last 20 and said, "Go put together your first small factory with one piece of equipment of each kind." And we did that.

Q: Then what?

A: After that, we got profitable. Then we went to the public market and raised $70 million, followed by $110 million, followed by $200 million, and followed by another $190 million last year.

Q: Pretty soon you're talking real money.

A: Yeah. It's a matter of trust. You know the last offering I did was with Credit Suisse. It was a convertible debenture, a debt, where I paid only 3.5 percent. I didn't even have to go on the road to talk to investors. They knew me already.

Q: If I read this right, you are yet to achieve "the big, hairy audacious goal." Those are your words, not mine.

A: That statement was true only to the beginning of this past year. Our big hairy audacious goal was to pass the billion-dollar mark -- and we did that in October 2000.

Q: Wow. Congratulations!

A: This year is the first year Cypress will do about $1.3 billion in sales, and we'll make about $400 million in pre-tax profit.

Q: In the wake of having achieved this long-term goal, what is your next goal?

A: We're in the process of setting that right now. It probably will not be financial. It will probably be a financial goal combined with owning some market. In other words, the next goal could be the Intel of some segment of our market.

Q: One of the reasons I wanted to talk with you is because you are atypical in a whole bunch of ways. Back in '96, you crossed swords with a nun over something that normally just intimidates people in your position. What happened with Sister Doris Gormley?

A: I got a letter. It was a Friday night. The letter said that the nun who was the investment officer for a convent in Pennsylvania had not voted for the slate of directors. In other words, she had voted to fire me as the director of the company I had founded. The reason was, even though there were no pictures in the board book, she inferred from our names that the board of directors -- there were four of us at the time -- were all white guys. And she knew that companies needed to have gender and racial diversity.

Q: Notwithstanding qualifications, ability, talent or anything else?

A: Yes. You have to be able to talk to me. If you want to get into the semiconductor business, you actually have to be able to understand the business and be able to talk the language. We have 35 percent minorities at Cypress. Silicon Valley is just a hugely diverse place. I'm 52 years old. It just so happens that the people in these four positions are ten years older than me, and they are engineers and businessmen. It so happens the kind of people we were looking for, former CEOs who can help lead Cypress and me, happen to be four white males.

Q: Shame on you!

A: I wrote her a letter. I decided to use her as a forum to vent and to express a philosophy. So I wrote her a six-page typed letter, which was also printed on the front page of the Wall Street Journal, explaining to her the immorality of her position. I kind of switched the table. That led to a series of debates. I got a thousand letters. It was more than all the other things I've ever written in my life added together. I ended up finally meeting her at Stanford and I debated her in front of the Stanford University Law School Colloquium on Corporate Government.

Q: Jesse Jackson claims that many black and brown professionals say they are being locked out of the industry despite getting training. About a year ago, I was working in San Francisco and we did several programs on those H-1B visas. A lot of people called that were really upset, saying they've been in the business for 20 years and couldn't get a gig, but these CEOs, like you, are begging Congress to let in foreign workers. What's the real deal on that?

A: I can tell you that I have personally testified in front of the U.S. Senate Subcommittee on Immigration on H-1B, in favor of it. I can tell you that Jesse Jackson is wrong. I wrote another letter just like the one I wrote to the nun. The quote was he had talked to many people of color who were qualified from the best universities in the country to work in high-tech companies and I said his position is ridiculous. We're like all Silicon Valley companies -- I've got several hundred jobs open. I've never not had dozens of jobs open every minute of every day for the last five years and there is no one with a college degree in engineering who can't get hired in Silicon Valley -- who can't get five job offers in one week. So, we will hire all those people. And I told him, please send me the resumes of the people you spoke to.

Q: How many resumes did you get?

A: I didn't get any -- and I would have hired them. It is true in Silicon Valley and it will continue to be true: There are more jobs than there are people. There is an exception -- when there is a dislocation where sometimes a few people in the software industry can't find jobs. And if you track it down, you'll usually find someone is not qualified to take a job, refusing to take a lower-level job, deciding to be unemployed, or griping that they didn't get the big job they weren't qualified for.

Q: But what some of these guys are saying is, they may not have the specific skills that are required for a job, but you're going to have to train the people you're bringing over from India or Pakistan anyway. These Americans are just as trainable, so why not give them first dibs?

A: We have very few software people in the company. I do have a few dozen, but we're not a software company. We're a chip company. But it just simply isn't true. I debated a guy named Professor Matloff from U.C. Davis, who is sort of the spokesman for the software whiners of the world. On his dare, I had my information services group interview people from his school and look at their resumes.

Q: And?

A: They basically qualified for entry-level jobs in the company and there were none of them willing to take it. The fact is, the same would be true for an immigrant. I have to pay the same amount of money for the same skill set, and I am not Stanford and I'm not Berkeley. We hire people that basically have to be very close to the skill set required for the job. We do a lot of training, but we can't give you your last year in college. That last year in college, you have to get yourself. Then we'll train you about our specific software. Aside from software, if you are in any hardware activity -- electrical engineering, process engineering, wafer maker -- there are hundreds of openings in Silicon Valley, and you will not be unemployed.

Q: One of your board members made the observation that companies go through stages in transition. You don't run a $6 million company like you do a billion-dollar company. How do you manage that from a personal basis as a manager?

A: You have to realize that no matter how you manage a company, your method for managing the company will become nonfunctional -- typically in a period of about a year to two years. So, you have to prioritize making the company successful over everything else. You can't have any sacred cows. Back when we were a start-up, I was hiring the hottest techies in town. Getting money from venture capitalists and bringing the first product to market were all that mattered. Then -- when we were newly public, learning how to report to the public, dealing with analysts -- making the company grow and reporting earnings and earnings growth was all that mattered. Now, we've got 13 design centers all over the world -- Bangalore, India, all over the United States. We've got plants to make our products in Roundrock, Texas, and Bloomington, Minn., and now we're figuring out how to make sure the other guys run the company properly. The job is watching over them and making sure the company is being run well by others.

Q: It's a long leap from technician to recruiter to cheerleader.

A: It's interesting. You turn out to be, in the last analysis, a quality-control person. Very strange. And that, by the way, is one of the things that gets you. When you're a techie, you rarely think about quality control, because it's wired into the way you work. Later on, quality control is all that matters, and you have to watch over everyone else and not get sucked into trying to do their job, but stand back and guarantee your investors that your people are doing their jobs right.

Q: Someone told me that you and your board are much more involved in operational stuff than the ethereal things. Are you guys micro-managers?

A: No. We're micro-knowledgers. We know a lot about everything and we try to stay on top of it -- and try to stay technical. But we don't give orders down.

Q: What's the difference?

A: The difference is, I'll bring in a vice president and the vice president will explain to the board in excruciating detail for an hour what he does, how he does it and why he's going to win. And we say, "Looks like you're going in the right direction. Here's some advice." And we turn him loose. I believe the flip-side is if you go into the ceremonial CEO role and you run around in your airplane or your car -- whatever you do in Fortune 100 companies -- if you don't keep your roots in and understand and stay with the technology, you will drift away and eventually become useless.

Q: So you don't use a lot of committees and task forces and things like that?

A: Not at the board level, no. We jam a lot into a board meeting. We show everything to everybody. I like consensus on the board. I don't like to make major moves that can hurt our shareholders or help them based on just the opinion of one or two people. Our board members are big important people.

Q: You haven't been shy about ignoring their advice in the past, though.

A: That's true. And I can say, in retrospect, that nine times out of ten, when I ignored or didn't act quickly on the advice of my board of directors, I was wrong and they were right.

Q: Give me an example of the worst mistake you made in not following their advice.

A: I started a company that made microprocessors. I put it together in a way that it had separate equity for that company versus this company. Their stock versus our stock. Therefore, I built in a win-lose situation where sometimes what was good for mother Cypress wasn't good for the subsidiary and vice versa. I ended up with a real big wall between the company and us, and it was against the recommendation of the board to structure the company that way. I thought I could surmount the difficulties and I didn't. They were right and I was wrong.

Q: What was the net result?

A: It got going. They lost money and I sold them to a Japanese company and left the business. Major nuclear hole in the ground. I was wrong, the board was right.

Q: You guys have been around 18 years. You are like one of the graybeards in the Silicon Valley. When do you plateau and, when that happens, are you at risk?

A: No, you are not at risk. Because, it turns out, in Silicon Valley experience is at a premium. You're right -- I get treated like a graybeard -- and I'm 52. But the fact is, I've been through cycles.

Q: By the way, I'm 52, and I happen to think that is still young.

A: I do too. I'm still in shape. I run every day. But in the world of Silicon Valley, I'm an old guy.

Q: You're a grandfather.

A: Right. And, therefore, I've got war stories to tell. Just as I told you my board said don't do this or don't do that, or try this and try that, I can advise other people. Experience is at a premium here. You can always go on other people's boards. You can always become a venture capitalist. If you are a successful entrepreneur, the world is yours. You can do whatever you want.

Q: One of your board members said that start-ups can beat the big boys through focus. Are you guys afraid of losing focus or do you figure you can just buy up those start-ups?

A: Both. I'm always afraid of turning into a big company. That's one of the reasons when you asked the micro-management question, I avoid doing it, because I want the energy of a lot of little companies within Cypress. I would much rather have our $1.3 billion company act like five smaller companies, which is the way we are organized, than to get big and bureaucratic. Also, right now, we have over a billion dollars in cash in the bank, and we're buying about one company per quarter.

Q: Do you spend more on research and development, or is it more on snooping around to identify the next young Turk so you can buy him up?

A: Both. We spend about 300 million bucks a year doing R&D and that's a huge management task. We've got 350 chip designers at Cypress and making sure they are all doing the right thing -- and on schedule -- is a big job. But even then, spending as much as we do on R&D, we're looking not so much to get bigger in R&D but to acquire R&D that is special and different that can set us apart from our competitors.

Q: Doesn't there have to some point of diminishing return with these chips where you simply can't get any more on there?

A: The shrinking of chips is called Moore's Law. Gordon Moore lives in Woodside, Calif., which is the same town where I live. It's in the hills above Stanford. I remember when Gordon Moore came to a company I was working at called AMI in 1973. They were getting very worried they couldn't shrink transistors anymore. They were at 1.8 microns at that time in size. The human hair is about a hundred microns. And he told me they were worried they were getting near the end. Today, transistors are 0.18 microns. They are 10 times smaller and 10 times faster. And we can see clearly to making them two times smaller still. Right now, the end in the roadmap is supposed to be 0.1 microns, about twice as small as where we are now. Every time we think we see the end, smart people figure out how to blow through the barrier and get on with it.

Q: Don't the laws of physics suggest that at some point, this is it, that you can't get any smaller?

A: Yeah. It turns out that one of the guys I went to Stanford with did his Ph.D. dissertation in the early '70s on the physical limits of transistors. And it is exactly when transistors stop transisting, stop having gain, when the insulators stop preventing current flow, that transistors stop working. But we find new structures all the time. We find new materials all the time. And those are the fundamental barriers that we are working on. My Ph.D. is in transistor physics -- I'm an expert in the stuff. There has never been a generation of a transistor we made here at Cypress -- we are currently making our 0.15 micron generation -- where I can't tell you for a fact the year before we started to ship it, there were absolutely unsolvable problems that, if we didn't solve them, would prevent us from doing the next step.

I can tell you that two years from now, we're going to be so big in sales, we're going to have so much profit and we're going to grow, and I can also tell you that there are three or four fundamental problems that if we don't solve, will wipe all of that out. That's always the way it is. That's the so-called state of the art. That's what it means.

Q: The problems you've identified, are they technical or are they managerial?

A: They're technical, in terms of continuing to shrink transistors and putting more and more on a chip. Take a wire that you plug into the wall, a conductor surrounded by an insulator, plastic. What would happen if you made the wire smaller and smaller and smaller? Eventually, the insulator would get so thin, the current would leak through it, and it wouldn't keep the current in the wire anymore. We have battles like that. Things stop working in the way they work in the normal size world when you get down to where quantum mechanical effects start taking over.

Q: So how do you cope with those reality checks?

A: You've got a bunch of Ph.D.s, and they are banging away and they say, OK, we're going to use zirconium oxide instead of silicon oxide for the gate, and this will do this and that. There are fundamental materials problems that we're working on. Right now, we ship chips with 50 million transistors on them. It turns out that's more transistors than were in IBM mainframes. Therefore, a chip today is more complicated than an IBM mainframe computer was just 20 years ago. That means a chip designer has to do as much work and know as much stuff as computer designers did to make a whole box 20 years ago. So even designing a chip, keeping track of all the transistors, is a big deal. We just brought out a chip a month ago that I had 50 people working on for three years to make one chip -- 50 different engineers in five different states.

Q: Since this stuff is so high-tech, so cutting-edge and in your industry things change almost as quickly as the clock, what do you do about security? Industrial espionage? We have already seen ample evidence the Chinese are anxious to steal whatever they can. How do you prevent that? Do you have a big security operation?

A: No, I don't.

Q: Should you?

A: No. We have rent-a-guards that sit at the desk. You have to sign in and have somebody escort you in and out. And there is only one open door in every building. But if someone decided they wanted to get in and get at our secrets, they could do it. The problem is that when you create one of these technologies, you patent it. We get over 100 patents a year. And it's got an earmark, so you know exactly what you've done. Nothing could be better for me than to have my worst enemy come and steal my best secret and use it. And right when they are starting to sell it at about $100 million a year, I would go find out they were using it by reverse engineering their chip and they would find themselves in court with a big problem.

Q: What does T.J. stand for?

A: Thurman John. That's why I use my initials.

Q: If people wanted to find more about Cypress Semiconductor, how do they find you?

A: Our website is and my e-mail address is and we can guide any other special requests through that e-mail address.

Q: Where do you think you guys are going to be five years from now?

A: Five years? We'll be at five billion.

Q: You just cracked one billion, and now you say in five years you'll be at five billion?

A: Yeah. Once you hit the billion-dollar mark, you start growing real fast. Look at Intel. You know, you struggle to get to 100 million. You go from 100 to 200 million real fast. You struggle to get to a billion dollars, but then it is only doubling a couple of times to get to five billion. That will require us to build. We have a billion-dollar plant in Minnesota. We'll have to build four more billion-dollar plants. They'll probably be in the U.S., perhaps one in Europe and one in Japan. Our objective is, every time you talk, put data on the Internet or talk on the telephone, your voice or your data will go through one of our chips.