Q&A with Ray Zinn, Co-Founder of Micrel, and Silicon Valley’s Longest Serving CEO

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This interview is with Ray Zinn, who has managed to beat the odds with determination and hard work, to become Silicon Valley’s Longest serving CEO (thus far). Obviously, Ray has seen considerable change over his career, crystalized during the founding and growth of Micrel.

Not one to go quickly into retirement, Ray has been busy writing a new book, Tough Things First: Leadership Lessons from Silicon Valley’s Longest Serving CEO, available November 3, 2015.

Below is a summary of a Q&A session I had with Ray, highlighting some of the lessons learned during his 37 year tenure at the helm of Micrel, through the acquisition by Microchip Technology. During this time he has seen a lot of change and transformation within the manufacturing industry.

What would you tell our readers was the best strategy that helped you navigate a path forward for Micrel during these changing times, specifically with regards to technological breakthroughs and a continually evolving set of possible IT systems infrastructures?

Even though I had been running Micrel, a semiconductor company, for 37 years, I have actually been in the semiconductor business since 1963. What I can relate to are the changes that I have seen to my industry over the past 52 years. When the industry started back in 1957, we were basically replacing vacuum tubes. There were no semiconductor equipment manufacturers, so we had to build all our own equipment.

It wasn’t until about 1965 that the industry had matured to a point where semiconductor equipment manufacturers came on the scene. There were only a handful of equipment manufacturing companies during the early 1960’s and, for that matter, there were only a handful of semiconductor companies. When I took Micrel public in 1994, there were less than 200 semiconductor companies in the world. Today, there are over a thousand. Most of these companies do not have their own manufacturing capability, but rather, out-source everything. Micrel, on the other hand, has had its own wafer fabrication manufacturing capability since 1981 in Silicon Valley.

Back in that time frame, there were probably 10-15 semiconductor manufacturers that had manufacturing capability in Silicon Valley. Micrel, like most of the other semiconductor companies, did out-source the assembly manufacturing portion. Up until August of this year, Micrel manufactured over 90 % of its wafers still in Silicon Valley. However, after the acquisition of Micrel by Microchip, it was deemed too costly to manufacture silicon wafers in the Silicon Valley.

More and more of the semiconductor companies are closing down their Silicon Valley manufacturing operations for two reasons: 1) the wafer facility expenses are more than double that in other U.S. states, and 2) California is not a friendly place to do business, because of government regulations. I believe you are going to have in California, and primarily in the Bay Area, software or non-manufacturing oriented companies. Micrel used to employee nearly a thousand people in Silicon Valley, but because we began moving our manufacturing to Asia, the head count dropped nearly in half. The big challenge for Micrel has been trying to keep its wafer fabrication facility cost effective in Silicon Valley. To do this, we have had to focus on unique manufacturing processes to differentiate ourselves.

Speaking from a CEO’s perspective, what were some of the toughest challenges you faced while at Micrel, and how did you overcome them?

As CEO, the most difficult challenge I had to face was remaining competitive while manufacturing in the Silicon Valley. We are one of the few semiconductor manufacturers that was left in Silicon Valley, and I consider that a success story. The advantage of manufacturing in here was the great talent pool. Trying to balance that benefit with higher costs has been the challenge.

Looking forward at the world of manufacturing, and the increasingly connected “Smart Manufacturing” initiatives that are being actively pursued (as one example), what are some of the challenges you see for manufacturers seeking to build the best possible products while being constrained by the incredible global competition that is now upon us? Where would you invest in today to make the biggest possible impact on future viability and competitive advantage?

I am a firm believer of the importance of maintaining manufacturing in your country – in my case, the U.S. – or risk losing a competitive advantage. When you outsource everything, there is a risk of losing your intellectual property, which might be too high a price to pay. Those suppliers or partners might ultimately become your competitor. Speaking from my experience in the semiconductor industry, the key is to continue to improve the automation of manufacturing processes, to the point where higher labor costs become a smaller part of your overall cost structure.

Robotics and smart factories will be the key to retaining a strong manufacturing presence in those countries where higher labor costs are the norm. It is also important that government policies and regulations are written and enforced in such a way to not be highly detrimental to overall business productivity. Governments have an important role to provide an environment that is conducive to investment into new technologies, as well as to encourage continued growth.

 

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Gordon Benzie