The Rise and Fall of Motorola

Motorola, RIP.

I'm not a professional historian. Heck, I haven't recently stayed at a Holiday Inn Express so I can't claim any expertise in the field. (That line refers to the cool advertisements where someone mentions staying .... oh, you probably have seen that.) However I can say with some credibility that "I was there." At least to some extent. For over thirty years I worked at what was, at the time, arguably one of a handful of the great technology companies in the world.

My "perch" was outside the mainstream of the equipment portions of the corporation. It was inside the "digital DNA" of the firm, where the semiconductor "chips" were designed and manufactured. I started as a "fresh-out" new engineer on the "Engineering Training Program" in Phoenix in 1964. There were fourteen of us, and it was the best decision of my life to take that offer and land on that program.

At any rate, I ended up in product engineering, which would produce many of the business managers. Many of us rose up into product management and higher, with responsibilities for overall product businesses and then divisions of the company. The "generalist" training with technology, operations, marketing, and customer responsibility proved to be important. In later years, I had an unusually close relationship with both the Motorola cell phone business as our primary liaison from the semiconductor side, as well as with HP from the same perspective.

Motorola had its roots in radios and radio communications. The company started in 1928 and really took off when Galvin Manufacturing, started by Paul Galvin, introduced the first car radio in 1930. Although it was large and difficult to install, the car radio rode the boom in both radio and automobiles. He started out selling the gadget from the trunk of his car at auto shows (he had to demonstrate it in person, the concept was so new). Galvin Manufacturing morphed into Motorola (coined from Motorcar and Victrola, the new phonograph and radio for homes) and the company moved into a plant in downtown Chicago.

Motorola was an engineering company. Innovation was in the DNA, apparently, and the firm led with introductions of entirely new categories, including the car radio, FM transmitters and receivers, portable "walkie-talkies" for military and later commercial use, large screen portable televisions, the first rectangular color picture tube for TVs, pagers that could both receive and send back messages, and the cell phone. At one point, Motorola had over 70% market share in cell phones ... but failed to  recognize the transition from analog to digital, and lost their leadership to Nokia. The Finnish company took over with the European digital standard (which Motorola helped to define, but resisted fully implementing it in a product line, since the new phones cannibalized their leading gold mine of analog phones). The company's top management tended to let the separate businesses operate in an independent manner.

The single largest failure was the inability to see that "The Internet Changes Everything." This led to resisting the transition of the cell phone from a voice communication device to a connection portal to the Internet. In fact, the key people in Motorola all referred to the cell phone as a "radio," which it was. Indeed, Motorola made the best radios, including the flip-phones. But making the best radio, with an efficient antenna and efficient voice modulation and all that was not where the world was going. The world was going to a hand-held consumer product, a platform to connect to the Internet and run applications and, oh yes, to make phone calls. Once Apple recognized that, even with reasonably faulty early phones, Motorola was left in the dust after success with their RAZR digital phone, which was digital, but largely pre-Internet.

Motorola was an engineering company. They made the best radios. The world ended up adopting adequate radios inside great devices that ran myriad cool applications on the Internet.

As examples of two extraordinary errors of senior management, Moto (the lovable nickname) stayed much too long on their analog cell phone, and spent billions developing a satellite-based communications system of cell phones that could be used everywhere: in small isolated towns, in the "middle of nowhere," on mountain tops, the middle of the ocean, in the Amazon Jungle, etc. What they didn't anticipate was that cell phone systems would spread worldwide like wildfire, and except for the middle of the ocean and a very few other locations, cell towers became ubiquitous and the need for the Iridium System was severly limited. A multi-billion write-off resulted. And a priceless misstep.

The semiconductor arm of Motorola was a strong #2 in the industry in the 1960's and 1970's, with leadership in discrete, or individual component products like transistors and small-scale integrated circuits, which included multiple transistors on one "chip." Eventually, the firm's leading integrated circuits featured some of the highest-performing ICs including the 68000 series, which powered Apple's computers, as well as many of the "brains" in automobile engine controllers and the infrastructure (plumbing) of the Internet. But the loss of leadership began when Intel won the design-in the the new IBM personal computer, which then was "cloned" by many other companies as the platform became a standard.

The fundamental reason for the decline in semiconductors was a failure of the management team to understand that the industry was transitioning and what that meant. For years, Moto's semiconductor business was a collection of independent business units all competing within a loose framework. The overriding thrust was to make the best transistors and best integrated circuits within different "product" groupings. There were all sorts of businesses for discrete transistors and various forms of ICs, including analog, gate arrays, digital signal processors, programmable logic units, small microprocessors, large processors, and so on. In some way, this was analogous to the corporations's overall personality:  "making the best transistors," and "making the best radios." All the time, the industry was changing.

In semiconductors, the number of individual transistors was increasing at a dizzy rate, called Moore's Law after Gordon Moore of Intel. This meant that the number of transistors would double every year and a half, and go up by a factor of four every time the process would transition to a new generation. If one doubles anything every year or two, the number gets very, very large quite quickly. See my blog from December, 2013: Reflections on the Evolution of the Semiconductor Industry for more details on Moore's Law:

The newest ICs transitioned to "Large Scale ICs, " then to "Very Large Scale ICs," and so on. Systems engineers realized that by placing a microprocessor in an IC, and surrounding it with peripheral circuitry, a sub-system was practical. These sub-systems soon grew to the point where significant amounts of software could be run on the processor, and the customers soon were demanding subsystems along with application-specific peripheral circuits and supporting software. This trend was counter for "individual bastions of products" at Moto's chip business. In addition, the various kingdoms each had their own favorite manufacturing centers (and dissimilar process technologies) in many cases, thus the overall business lacked the centralized manufacturing "clean rooms" to gain economies of scale, along with the inability to offer attractive solutions for systems needs.

Given the huge losses with Iridium, and the need to generate cash, the corporation spun off the "discrete transistor businesses," many of which were located in Phoenix, and On Semiconductor was formed in 1999. The IC businesses, headquartered in Austin, but with several in the Phoenix area, struggled on as management centralized manufacturing and design tools, but it was late,  too late for industry leadership, even though there were several important market segments where the businesses achieved #1, automotive engine controllers and networking systems among them. In 2004, Motorola divested the remaining semiconductor assets , a $5 billion business, and spun it off as Freescale Semiconductors. It persevered under a huge debt load, imposed on it by the financial terms demanded by the leveraged buyout, and was merged into NXP corporation (a Dutch firm) in 2015.

As cell phones dominated the corporation, and losses in cell phones dominated the balance sheet, Motorola split itself into two in 2011: Motorola Mobility, and Motorola Solutions. "Mobility," the cell business, was sold first to Google, which kept the patent portfolio, and then sold the actual cell phones to Lenova, the huge Chinese company that had bought IBM's personal computer business. Today, many of the original "guts" of Motorola survive as "Motorola Solutions," for the most part the modern-day essence of the FM radio communications capability. As always, Moto makes great radios.



5 Responses

  1. Jim, as one who was there for part of the history, and still present to see what the future brings to the semiconductor portion I truly enjoyed reading your blog. I love your breakdown of Moto to the basic “Moto makes great radios”. I was describing to my youngest daughter the other day the history of Motorola and ended with “they’re still making radios”. So I had to laugh when I read your blog. I was in the DSP group under your watch along with George Hawkins. I’m sure George would have had a lot to add to the history of Motorola but I’m sure he would end with “they make great radios”. Darrell Carder
    • JK James George
      Hi Darrell, Thanks for the comments, and frankly, I'm surprised that no more former Motorolans have not commented. We all were do dedicated to the company. I recall George Hawkins with great admiration. He also was a fellow ham radio operator, so we had lots of "radio" connections, both at work and as a hobby. Jim G.
  2. So here is another former Motorolan commenting. I had the pleasure to serve under you for a couple of years. Yet we both were in the semiconductor business. It used to be sad to listen to the investors conference calls during which Fred (Shlapak) would barely get a question. Motorola was always about "radios". And when they lost their way (coincidentally with the passing away of its industrial chief designer) everything went downwards. The semiconductors business lost big with 68040 (late, buggy etc.). The rest is just history (which you depicted well). I left in 2002 (angry). Returned in 2007 but left in 2009 (angrier). Yet, with all the sadness of the demise of Moto Semi, we should remember the beautiful decades we had with what was once a great company.
    • JK James George
      Paul, I really appreciate and endorse everything you wrote. You are such a good example of the competence and cooperative personality that exemplified the way Motorola was when we did well. So many decisions were based on the short term and protection of all our little empires in the product groups. It's amazing that a fundamentally mean/crude and selfish very senior executive like Ed Stiano could have been promoted and endorsed by the executive threesome. And that Bob Weissappel could have not foreseen the advantages that digital technology would being, and that the cell phone would become, from a marketing standpoint, primarily an access point to the Internet applications. These are the really BIG things that the executive suite must being to a company. In our case, they missed it both with inappropriate management selections and a strategy that was fatally faulty. Then there is Iridium that was such a financial disaster. The chain of these was a killer. Jim.
  3. JK James George
    From a Motorola retiree living in Montana, via email: Jim: I read with interest and nostalgia your article regarding the demise of Motorola. Tried to reply but got a message that FaceBook deleted my post as it might inflame someone. Really! I was kind and respectful. In any case you might remember me, David Golsner, Mgr of the Instrument Calibration and Standards labs in the PHX valley. I too lament the demise of a once great company. Although much lower in the food chain than you it was clear to many at my level (E11) that the selection and promotion to the senior management positions was more "Good old boy network" related than those who would have been best for the position. The arrival of (Deleted) tore down the culture of the Semiconductor Sector. It was, to me, a sign that the peak had passed and that it would be just a matter of time for the final demise. When one tears down a culture there had better be a replacement in mind and not just chaos. There was no new culture proposed or at least communicated! It was a good 40 year run for me but, although I do not dwell on it, there are still bitter feelings over the way the force reductions were justified. Perhaps "sadness" over what was lost is a more accurate thought than bitterness. Now living on 2.5 acres in Montana, South West of Bozeman, The fly fishing is superb! And i got off my rear and passed the Extra! Very best wishes,

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