Dallas Semiconductor

Dallas Semiconductor Corporation designs, manufactures, and markets electronic chips and chip-based subsystems. The Company continually invests in multiple, non-commodity products using advanced technologies to reach diverse markets and customers. Founded in 1984, Dallas Semiconductor's strategy has resulted in diversified revenues, balanced end-markets, and a global customer base. Key Dates: During the early 1980s, a number of competitors in Asia and the United States had developed less expensive ways of making a chip capable of performing the same function as Mostek's. 'With almost no warning, we went from having a wonderful time to being in great jeopardy,' Prothro told Investor's Business Daily in 1993. The semiconductor war was on, and the market became treacherous. One of Mostek's problems was that it hadn't diversified either its product line or its customer base: 70 percent of its sales were of the same product, split between five customers. In 1983 Prothro left Mostek and with a number of partners formed Southwest Enterprise Associates, a high technology venture capital fund. The following year, Dallas Semiconductor was established as Prothro and Southwest Enterprise joined forces with Dr. Chao C. Mai and Michael L. Bolan, former Mostek executives, and John W. Smith, Jr., a venture capitalist who assumed the duties of president, chief executive officer, and chief operating officer. The founders recognized the need for a strategy that would prevent the company from relying on a single market, product, customer, or technology. 'The semiconductor industry long ago learned to make the same product cheaply,' Bolan told Fortune in 1985. 'Our goal is to make unique products cheaply.' Its strategy was to address specific client needs, develop a solution, and then later adapt the solution to fit other client needs. One of the primary ways Dallas Semiconductor sought to do this was to allow clients to customize chips at a very late stage in the production process. Known as 'late definition technology,' the process used ion implants, lasers, or embedded lithium to etch chips according to precise customer specifications. This process gave Dallas Semiconductor a great deal of flexibility in adapting to changes in the marketplace and also provided the foundation for the company's versatile product mix. 'All the major developments in the industry have been decided by the marketplace, not by planning,' Bolan said in 1985, adding that 'Our cardinal promise is not to fall in love with any one product.' Another innovation was a product whose origins could be traced to Mostek: the pairing of lithium batteries--a small, long-lasting battery found in wristwatches--with a random access memory chip called a complementary metal oxide semiconductor or CMOS. CMOS chips were used to power individual software programs and were popular because data could be added to or erased from them at will. Their main drawback, however, was that whenever the power supply was cut from the chip, all stored data was erased from the chip's memory. With this new product, known as nonvolatile RAM, the lithium battery would continue to supply power when electricity failed, allowing the chip to be powered continuously for over ten years. The development was essential for lifesaving medical equipment and for cash registers or banking systems that keep running totals of deposits and other transactions. By March 1985 Dallas Semiconductor had regional sales offices in Philadelphia, Indianapolis, and Phoenix, and had begun filling orders for a series of nonvolatile RAM it had developed based on the lithium battery technology. The company also introduced a line of electronic chips based on the same technology that prevented software theft. The product consisted of a key containing an integrated circuit coupled with a lithium battery and a corresponding socket inserted into the computer. Software manufacturers could encode the key's circuit to match a code in the softw