Silicon Labs turns twenty this year, so over the course of 2016 we’ll be taking a look at how we got here, where we’re going, and meet some of the employees, partners, and customers that have helped shape the company over the last two decades.
In our second part of this series, we’ll take a look back the company’s first half-decade and see how the seeds of innovation were sown.
Silcon Labs’ story began in the 1980s, when a group of engineers bonded at Austin-based startup Crystal Semiconductor. In the largely digital semiconductor world, Crystal was focused on the rarest and most difficult type of electronic circuitry design – mixed-signal, which takes analog signals like sound and radio waves and converts them into finite digital numbers.
Dave Welland, who was the first Crystal employee, had an especially strong relationship with Nav Sooch and Jeff Scott, who had also worked together at AT&T Bell Laboratories. When Crystal was acquired by digital-focused Cirrus Logic in 1991, the three began looking for new mixed-signal design challenges, which would give them control over their own destinies. In early 1996, the siren song of entrepreneurship grew louder, and after months of weekend brainstorming sessions and a long lunch that ended with a coin toss sealing their decision to start a company, the group resigned from Crystal.
1996 – Silicon Labs is born
The team began tearing products apart, looking for components that could be replaced with computer chips or integrated circuits. The first opportunity they found was on a modem card. In the early days of dial-up Internet, every modem was required by law to have a DAA, or direct access arrangement. The DAA protected the phone line from electrical power surges and acted as a translation mechanism between the computer’s digital language and the phone’s analog signal. But existing DAAs were a mess of bulky components, and the team believed they could create a smaller, less expensive, and more elegant version on an integrated circuit. They continued to disassemble everything they could get their hands on, so it didn’t take long to unearth another promising opportunity with the radio frequency (RF) synthesizers found in cell phones. These synthesizers, which assigned a frequency (or channel) to each incoming call, were clunky, and the group felt they could do better.
1997 – Austin Ventures invests $5 million in first round of funding
In March 1997, Silicon Labs secured a $5 million investment from Austin Ventures based on the DAA for modems and the RF synthesizer for cell phones. Sooch became chairman and chief executive officer, Scott became vice president of engineering, and Welland became vice president of technology.
While diversification was their long-term goal, their immediate objective was profitability. It would take time to solve the design challenges that came with building an RF synthesizer in CMOS, so they threw most of their resources into the DAA. Their timing was perfect. The PC industry was transitioning from hardware modems to software modems, which created a perfect target for getting Silicon Labs’ products to market quickly.
1998 – The DAA goes from prototype to profitability in less than two years
Scott led research and development on the DAA with a team of new hires that included many Crystal alumni, such as Silicon Labs’ current CEO, Tyson Tuttle. As with all of Silicon Labs’ core technologies since, the team implemented the DAA in CMOS to ease the further integration of digital functionality in future derivatives as communications products continued to get smaller, less expensive, and more feature-rich.
Silicon Labs’ DAA was revolutionary because it was one-fifth the size of the existing solutions, cost half as much, and was programmable, which allowed users to customize it with their local language and standards. Previously, the industry required that a different version of a modem be built for each country. Silicon Labs’ revolutionary approach allowed a single modem to work worldwide.
Modem manufacturers PC-Tel and 3Com were Silicon Labs’ first customers, and units began shipping in April, just one month after the product was introduced. Based solely on the success of the DAA products, Silicon Labs achieved profitability in 1998 and reported $5.6 million for the year.
Silicon Labs’ DAA captured about half the v.90 modem market by 2003, and the modem products we’re selling 20 years later are still based on the DAA’s technology. That’s a remarkable feat in an industry where things often become obsolete within two years, and it speaks to our ability to identify and design for very specific markets.
1999 – The world’s first CMOS radio-frequency (RF) synthesizer chip
Because the DAA chips provided financial stability, Welland led a core Silicon Labs design team in building the world’s first CMOS radio-frequency (RF) synthesizer chip for cell phones. At the time, all of the RF chips on the market used a bipolar process. It was clear that redesigning the RF in CMOS could essentially democratize the mobile phone, making it much easier and cheaper to produce.
The RF synthesizer was an immediate hit when it went on the market in late 1999. Samsung was its first customer. The chip cost less than options offered by competitors, and because it fit nearly 80 components – including the functions of several bulky metal-can, voltage-controlled oscillator (VCO) modules – onto a single chip, it also saved handset makers valuable space.
Silicon Labs continued to diversify its portfolio of wireless, wireline, and optical products to add to the DAA’s powerhouse performance. The company generated nearly $47 million in revenue in 1999.
2000 – One of the year’s strongest IPOs
In March 2000, Silicon Labs raised $99 million with an initial public offering. It was listed on the NASDAQ as SLAB, offering 3.2 million shares at $31 each with an overall valuation of $1.2 billion.
The IPO more than repaid Silicon Labs’ venture capital investors, and still allowed the three founders to keep 45 percent of the company. It was a huge achievement for a company that had spent only $6 million to become profitable to go public, and also a huge win for the founders to retain such control.
Next time we’ll compare the technology landscape of 1996 with that of today. You can read the previous post in this series here.