Semiconductor Entrepreneur;

Faced with disaster, most companies just try to stay afloat. Not Micron Technology. 'We wanted to do more than survive. So we went on the attack.'

 

What a ride! First, it was up, up, up. In the spring of 1983, little more than a year after entering the highly competitive field of computer memory chips, tiny Micron Technology Inc., in Boise, Idaho, was hailed as a success in high-technology manufacturing. Back then, Micron was the country's hero in the struggle for economic hegemony, a vindication of individual creativity and self-reliance against the might of Japan Inc.

What's more, Micron's bottom line gave substance to the sentiment. By the end of its 1984 fiscal year, the company was spinning profits of $29 million out of sales of $87 million, among the highest profit margins of any electronics company in the world.

Yet less than a year and a half later, in the spring of 1985, Micron had laid off half its work force and closed down one of its two production lines. Its stock had lost nine-tenths of its value. Its results for the quarter ending November 1985 showed losses of $11.6 million on revenues of just $5 million.

What had gone wrong?

Chief executive officer Joseph Parkinson blamed the Japanese, whom he accused of dumping their chips -- illegally pricing the product at below what it cost them to make it. Micron counterattacked with an extraordinary move for so small a company. The company launched an intense legal campaign in Washington, D.C., to solicit the Reagan Administration and Congress for protection against the Japanese companies' unfair trade practices.

And it won. The resulting penalties against the Japanese tightened up supply and drove up prices. The roller coaster was on a steep climb once again. In the spring of 1988, on the day that INC. senior editors Stephen D. Solomon and Michael Hopkins arrived in Boise to interview Parkinson, the local newspaper carried a front-page headline announcing that Micron had just concluded a stunning long-term deal with Intel Corp., the semi-conductor giant. Micron expects to be hiring 1,000 new workers over the next two years. Other vital signs are equally lively. In its second fiscal quarter ending February 1988, the company recorded net earnings of $16.9 million on sales of $58 million.

That's a stunning turnaround in anybody's book. INC. wanted to know how Parkinson managed his way through those bleak times. The interview began at the beginning -- with what might have looked, to anyone but Parkinson, like the beginning of the end.

INC.: The day the Japanese slashed their microchip prices, how much advance warning did you have, if any?

PARKINSON: I would say we had a week or two.

INC.: A week or two?

PARKINSON: Yeah, it was sometime in September 1984. I remember vividly, a group of us were here late at night, just back from the road, and we were all getting the same sense that this thing was turning, and turning quickly.

INC.: What sort of sense? Where did it come from?

PARKINSON: From customers, mostly. Customers are always your best source of information, provided you're in the same room with them, looking at them. But in this instance, the message would have come through loud and clear if we'd been on another planet.

INC.: It was that blatant?

PARKINSON: There you are, closing a deal with a customer, and you've got the feeling that $1.70 per chip will do it. But the customer comes back and says, "No, $1.70 won't do it. Let's try $1.60." So you say, "Well, suppose we come down to $1.60. Will you deal at that price?" And he says, "Maybe." Well, you hear a couple of messages like that, and it pretty quickly sinks in that your Japanese competitors are acting on one simple set of instructions: "Get that business at any price."

INC.: So that meant prices were dropping pretty fast.

PARKINSON: One month we were selling product at $3, and six months later, it's under a dollar, with some spot business going at 50 cents. We went from revenues of $12 million a month to less than $2 million a month. That's the kind of situation we were facing. And it wasn't pleasant.

INC.: There must have been plenty of moments when you thought, this is the end.

PARKINSON: Never. That's not the way we are around here. The way we saw it, we were being challenged. And we took up the challenge. There was no bunker mentality. Nobody said, "Let's hunker down and try to survive." We wanted to do more than survive. We wanted to prevail. So we went on the attack.

INC.: Most companies in your situation think survival. The idea of prevailing sounds absurd, or at least naively romantic, when you're fighting to stay out of Chapter 11.

PARKINSON: By committing to a survival strategy, you cut everything that doesn't directly contribute to the product going out the door. But you're just postponing the inevitable. It's true that we were intensely focused on cutting costs, which is a survival tactic. But we also continued improving the product, broadening our customer base, innovating new products. That costs money. But that's the only way to play the game -- play it to win. I'm not interested in survival, not at all.

INC.: Many of your domestic competitors didn't survive.

PARKINSON: Something like 65,000 jobs were lost during that period. Many companies got out or went bankrupt. And who can blame them? We were shipping 25 cents, 50 cents, with each chip we sent out. Many of our competitors were probably shipping a dollar bill. The Japanese, they shipped $4 billion before it was over.

INC.: In practical terms, what did it mean to attack, rather than just survive?

PARKINSON: Using our political muscle was a major part of the strategy. I got a call one day from a man named Nelson Hogge from the International Trade Commission. What he said was, "We've lost the memory-chip market, and we can't find anyone who wants to speak to the commission. Would you have any interest?" I did, and he introduced me to several other people who were sympathetic to our cause. One of them gave me the idea of suing the Japanese for dumping.

INC.: Some people criticized you for this. They said you broke therules -- running to the government to fight your battles for you.

PARKINSON: We're not competing with companies anymore, we're competing with countries. So we went to the government and told them that what was happening to us was against the law. It wasn't something I was eager to do, but what I found out very quickly is that as soon as you start facing the kind of threats that we were facing, all your political philosophies go right out the window. You look for help anywhere you can find it. Again, you can't sit back and try to muddle through.

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