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With money in hand, a sales team was recruited and a catalog of products set.
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Jerry Neal and RF Micro Devices had only one problem—making the chips work as promised.
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Even though Jerry had been taught by his father to “run toward problems,” not away from them, the challenges at times appeared overwhelming.
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RF Micro Devices had signed two customers interested in radio frequency technology—only neither wanted existing products.
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The first, a Canadian company, wanted to manufacture wireless motion and smoke detectors and asked Jerry’s firm to provide transmitter and receiver chips.
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They had been looking for a solution for two years and were willing to pay $185,000 in engineering fees to find a solution.
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The second was a Japanese company based in California which needed a power amplifier for an upscale phone.
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However, no power amplifier had ever been designed as an integrated circuit, and they were willing to pay $200,000 in engineering fees to make it happen.
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Suddenly, company projections of $1 million in first-year revenues looked promising.
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In reality, the path to making cell phones ubiquitous was littered with dozens of hard-fought failures alongside a handful of victories.
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In 1978, AT&T set up the first cellular phone system in Chicago with 2,000 subscribers; three years later Motorola established a trial system in Washington and Baltimore.
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By 1982, the Federal Communications Commission was ready to authorize commercial cellular service, mostly restricted to large cities where the huge, cumbersome “bag phones” could be serviced with towers.
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Despite the inconveniences, by 1987 a million subscribers had signed up for the service, outstripping capacity and transmission technology.
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Clearly, the future of wireless devices rested in digital technology in which the code of zeros and ones—which also operated computers—would convert and condense the voice signal to binary code, allowing a far greater number of calls to be transmitted over the same frequencies.
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RF Micro Devices believed that the semiconductor gallium arsenide, which conducts electricity six times faster than silicon, represented the future of power amplifiers even though the technology had never been used in a mass-market product.
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With one manufacturer, the price quotes were astronomically high; with another the chips failed to work.
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Customers were becoming impatient with the little startup from North Carolina that couldn’t produce a workable prototype.
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Meanwhile, the venture-capital firm providing $1.5 million was demanding that the company hire a chief executive officer of their choosing.
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The staff had grown to 16—five times the size of the prior year—while revenues reached $212,000 in 1993, almost $800,000 short of the goal.
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Two good-sized contracts helped Neal launch RF Micro Devices.
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As Neal’s company expanded, investors wanted more say in the decision-making.
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Just when RF Micro Devices needed new money, the company produced a working prototype that met all the criteria.
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Success was in the air: the chip was a powerhouse with a great potential for success—a real breakthrough in technology.
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It was Jerry’s job to tell the world through advertisements in trade magazines, speeches and hundreds of presentations.
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Quickly it became clear that the industry didn’t believe that gallium arsenide heterojunction bipolar transistor (HBT) could be reliable or produced at a reasonable cost.
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Most in the industry still saw it as flawed technology that only the government could afford to make work, and impractical for an integrated circuit power amplifier.
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So Jerry began giving chip samples to everyone who inquired.
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At the same time, the company had to return to its venture capital firm and ask for more money; the seed round of $1.5 million was spent.
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They asked for an extra $1.75 million and got it.
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The partners all gave up more equity in their creation, but they had little choice; they were dead in the water without new funding.
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To tell their success story, Jerry designed an advertising campaign featuring a levitating football field around the slogan “Optimum Technology Matching,” with two-page advertisements that were headlined, “Unfortunately for Our Competition, We’ve Just Unleveled the Playing Field.”
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The company then designed a second advertisement featuring a baseball that appeared to be coming straight at the reader, accompanied by the words, “The Last Thing Our Competition Sees Just Before Being Forced Out of the Box.”
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Jerry then mailed hundreds of specially designed baseballs to prospective customers with a letter that described RF Micro Devices’ revolutionary new product.
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And it worked.
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AT&T signed on, ordered more than 150,000 chips, and even appeared at a press conference in Washington to promote the new technology.
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The company was jubilant.
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Then, just as Jerry was anticipating millions of dollars in new revenues, AT&T canceled the order, along with the phone they had planned to introduce.
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Neal’s creative marketing approach brought in the sales.
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Next up was Motorola, which was selling one million emergency two-way radios worldwide every year and eventually redesigned their phone around the little company’s microchip and saved $10 million a year.
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Then came Qualcomm/Sony with its next-generation cell phone, which offered call waiting, caller identification, and call answering.
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Qualcomm had a reputation for being tough; they proved tougher and signed a letter of intent.
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At the same time, RF Micro Devices was running out of money—again.
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The company’s capital needs had grown from $3 million to $5.75 million; more investors were brought in, while more equity in the company was forfeited.
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Twelve-hour days had allowed Jerry to see his dreams coming into focus, while watching his ownership interest get smaller and smaller.
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By October 1994, RF Micro Devices had grown to 36 employees, 45 standard products, extensive quality monitoring program boundaries, and a greatly expanded lab.
RF Micro Devices continued to grow and to meet their own standards for quality products.
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As the year progressed, Motorola downsized its order, Nokia showed increased interest, Qualcomm/Sony was willing to be part of a joint advertisement, and the cell phone business was beginning to boom.
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Business was growing at 40-50 percent a year.
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Although few people had cell phones, most who knew about them were keen to have one.
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System providers could not set up systems fast enough; the demand for phones, base stations and other equipment was overwhelming.
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A maker of high-quality radar detectors, which had ordered 22,500 parts in the previous year, ordered 300,000 parts in 1995.
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That’s when Jerry got a phone call from Motorola: the chips were failing in emergency radios that required a zero failure rate.
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Then, another complaint: a small company in Maryland that made tiny transmitters for tracking migratory birds had also received faulty chips; trackers’ scientific studies, having lost contact with the birds, were ruined.
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A solution had to be found immediately or the company’s entire reputation would be lost.
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Working with Motorola, the company frantically searched for a way to troubleshoot faulty chips, only to discover that a-wire-bond was causing the problem.
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Then, in conjunction with a Motorola vendor, RF Micro Devices began testing the chips, rejecting entire batches if a faulty wire was found.
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In all, 40,000 chips—$184,000 worth, or 10 percent of the previous year’s sales—ended up in the dumpster.
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As that dilemma abated, Qualcomm began increasing the pressure for delivery of its new product.
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RF Micro Devices continued to grow and to meet their own standards for quality products.
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Changing one aspect of a chip could increase one function while lowering another.
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By midsummer, Qualcomm was ready to begin production, but habitually rejected RF Micro Devices’ chips as unacceptable.
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Tension was enormously high; both companies had a great deal at stake.
As Neal’s company expanded, investors wanted more say in the decision-making.
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Some meetings dissolved into screaming sessions.
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Jerry considered working with Qualcomm “one of the most difficult challenges of my career.”
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New pricing and new testing procedures were arranged, but frustration remained high when the foundry was unable to meet the production.
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As production issues increased, the venture capitalists agreed to invest further, bringing their total commitment to $23.5 million.
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As a result, the portion of the company owned by Jerry and his two partners was down from 12 percent each at the initial investment to 2.63 percent per partner.
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The original plan, outlined by the venture capitalists, was to sell micro devices within five years and get a return on their money 10 times over.
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But RF Micro Devices’ fantastic rate of growth had changed all that; as 1996 loomed, plans were underway to make the company publicly owned.
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RF Micro Devices needed to meet the exploding demands of its customers without losing its reputation for quality.