Striking It Rich

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Sometimes a company's backers insist on professional management from the start. David Lee, 44, of San Jose, invented a high-speed printing system, known as the daisy wheel, which is now widely used in office machines. In 1973, when he started his own firm, Qume, in Silicon Valley, he and his backers agreed that an outsider should be head of the organization. Robert Schroeder, a Harvard M.B.A., then came in to run the company.

Once the risk takers have established their firms and developed new customers, they face inevitable challenges from older and bigger companies that are attracted to the growing markets. The semiconductor industry shows what can happen. Intel in Santa Clara invented the first memory chip in 1968. Then American giants such as Motorola and Texas Instruments jumped into the market. After them came the Japanese, who now control 40% of the business for the most, popular size, the 16K memory chip.

Partly as a result of this increased competition, Intel sales fell by $66 million last year, and its profits were down 72%. National Semiconductor, whose earnings dropped from $30.2 million to $1.2 million during the last half of 1981, has halted construction of a plant in Arlington, Texas, and last year asked its employees to take twelve extra unpaid vacation days.

Intel President Andrew Grove predicts that his and other semiconductor firms can defeat the Japanese challenge. Says he: "Our industry is in a critical stage of development, with our market under attack. We are now fighting a vicious assault; but so far as I am concerned, we will succeed."

That kind of can-do confidence has always been the hallmark of American entrepreneurs. At a time when the U.S. sees its economic power eroding, these businessmen are a unique source of strength. They are pioneering new industries in telecommunications, bioengineering and lasers. They are providing U.S. business with a fresh burst of energy. Says Arthur Levitt Jr., chairman of the American Stock Exchange: "If there is any hope for our economy, it rests with these people. They are the most challenging, irreverent bunch around." They are also the bunch leading the U.S. into the high-technology future.

— By Alexander L. Taylor III. Reported by Michael Moritz/ San Francisco and Frederick Ungeheuer/New York

With reporting by Michael Moritz, Frederick Ungeheuer

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