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11/10/92


TITLE #m#gm#m##m#pls squeeze dec#m##m#sw#m#Sematech's William
Spencer: Building Support For Chip Consortium By Shifting Agenda
Brian Deagon

Two years ago, William J. Spencer agreed to take a position that
he wished hadn't been vacant.  Spencer stepped into the shoes
previously worn by his friend and skiing partner Robert Noyce,
who had died of a heart attack a few months earlier. Noyce, a
highly respected Silicon Valley pioneer and a founder of Intel
Corp., spent his last few years organizing and running Semicon-
ductor Manufacturing Technology Research Corp., the controversial
government-industry joint venture known as Sematech.

Spencer took over as president and chief executive of Sematech in
October 1990, leaving behind a prestigious job as group vice
president and senior technical officer at Xerox Corp., where he

handled all worldwide research and development activities.
Spencer joined Sematech with the belief that its efforts were
critical to the foto

future of U.S. industry.  "If we failed, it could set back
government- industry cooporation for years," he recalled in an
interview. "We had to be a success - not just from a semiconduc-
tor standpoint, but as a national experiment for other U.S. in-
dustries." Despite early criticism, support for Sematech has
grown under Spencer and the consortium, whose initial funding

expired this year, recently received congressional authorization
for another $100 million in government funding in 1993.  Sematech
was formed in 1987 to arrest an alarming decline of the U.S. sem-
iconductor industry. During the 1980s, the nation's share of the
$60 billion semiconductor market fell to 40% from 69%, while
Japan's share climbed to 47% from 25%. Japan also took over the
lead in sales of semiconductor manufacturing equipment, garnering
80% of the market.  At the time, government support of industry
through direct financial grants was anathema to the free market
policies of the Reagan administration. Nonetheless, Congress
agreed to provide Sematech with $500 million in taxpayer money
over five years to fund


Spencer Builds Up Support For Sematech

R&D. The 14 founding members of Sematech agreed to contribute an
equal amount.  Sematech was still struggling to prove its worth
when Spencer took over.  One particularly harsh and outspoken
critic, Cypress Semiconductor Corp. Chief Executive T.J. Rodgers,
told a congressional subcommittee in late 1991 that Sematech
looked "less like an industry consortium than an exclusive cor-
porate country club," with a dues policy that discriminated
against small, entreprenurial companies. Rodgers also accused
Sematech of withholding taxpayer-financed equipment from U.S.
companies.

New Agenda

A new agenda has steadily emerged under Spencer, and critics gen-
erally agree that Sematech has made a 180-degree turn for the
better.

Under Spencer, Sematech has tried gingerly to revise operating
procedures. It quietly dropped the practice of granting members
exclusive access to new semiconductor production equipment for a
full year.  Spencer also has worked aggressively to improve the
overall operating efficiency of Sematech, increasing its credi-
bility and effectiveness in the process, members say. In addi-
tion, Spencer has emphasized making decisions based on consensus,
which has helped reduce infighting that was damaging the
consortium's reputation.  "Before Spencer, Sematech was constant-
ly focused on Washington to keep the organization alive. It be-
came a cold organization," said Daniel Hutcheson, president of
VLSI Research Inc., a market research firm. Hutcheson, who was
once a Sematech critic, says he is "very impressed" with the
changes under Spencer.  Sematech originally focused efforts on
reducing the time and cost of making chips by searching for ways
to improve the manufacturing process. It now puts a higher prior-
ity on improving the equipment and materials used to build sem-
iconductors.  While that change caused some founding Sematech
members to quit, Spencer has generally been praised for his
moves.  VLSI Research credits Sematech with improving the sem-
iconductor equipment industry fundamentally. Both Intel and
Motorola now plan to buy substantial amounts of U.S. chipmaking
equipment that they had expected to buy from offshore suppliers.

Firm's Position Improved

And both VLSI and market research firm Dataquest Inc. report that
U.S. companies have substantially improved their position in the
semiconductor manufacturing equipment market since the start of
Sematech.  "Five years ago, Sematech was a grand experiment, and
there were a lot of false starts," said Arita Prabhakar, director
of microelectronics technology at the Defense Advanced Research
Projects Agency, which oversees Sematech. "In the last few years,
particularly with Bill Spencer's involvement, Sematech has
evolved into a mature organization that understands how fierce
competitors can cooperate," she said.  Noted Charles Boucher, a
senior industry analyst at Dataquest: "Spencer has been effective
in focusing Sematech into a specific set of needs and further
narrowing those priorities on a specific subset of goals." Spenc-
er, 62, didn't always have such lofty goals, however. He entered
William Jewell College in Liberty, Mo., as an undergraduate with
plans to parlay his athletic skills as a football and basketball
player into a career as a high school coach. But after he took a
physics course, the head of the department convinced him to
switch majors and to pursue a graduate degree in physics.  Spenc-
er graduated from William Jewell with undergraduate degrees in
physical education and mathematics in 1952 and received his doc-
torate in physics from Kansas State University in 1959.  He began
his career at Bell Laboratories. From 1973 to 1981, he worked at
Sandia National Laboratories, first as director of microelectron-
ics in Albuquerque, N.M., with the job of making electronic cir-
cuits resistant to radiation, and later as director of systems
development in Livermore, Calif., with responsibility for all nu-
clear devices stored in California.

He joined Xerox's Palo Alto Research Center in California as
manager of its integrated circuits laboratory in 1981.

A Look At The Competition


Spencer is sensitive to criticisms of government involvement in
industry, insisting that U.S. companies no longer can go it en-
tirely alone.

"The real question is what is the competition doing," he said,
noting that Europe and Japan already spend substantial amounts of
money helping industry develop critical technologies with commer-
cial purposes.  "When you look at our competition in Europe and
the Pacific Rim, government is cooperating with industry, making
them strong competitors," Spencer said. "The U.S. has to do the
same. . . . (But) it has to be a learning experiment, one that
fits the U.S. model of capitalism." Industry- run Sematech fits
that model, he asserts.  "I believe industry knows best what
needs to be done for industry," he said. "Sematech has to be
industry-led."

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