Silicon Insider: Solar Companies Glow Despite Economic Slump

Feb. 15, 2008 — -- Here's a toast to the superiority of pragmatists over idealists. Of entrepreneurs over bureaucrats. And most of all to those buzz-cut, buttoned-down engineers and scientists of a half-century ago who thought they were just making cheaper transistors – and now may help save the world.

Amidst all of the gloomy – or, at best, hesitant – corporate financial news of the last few weeks, one industry sector literally seems aglow: solar. And therein lies an interesting morality – or more accurately, amorality – tale.

Just this week, First Solar Inc., a Phoenix-based solar module manufacturer with a design center in Ohio and a big manufacturing plant in Germany, announced spectacular quarterly numbers. For the fourth quarter, company earnings were $63 million, up nearly 800 percent from the same quarter a year ago. Meanwhile, revenues only quadrupled to $201 million. Not surprisingly, company stock jumped 30 percent, to nearly $230, on the news.

These are the kinds of numbers you see in small electronics start-ups, and usually during booms – not an infrastructure equipment company at the beginning of an economic downturn.

And First Solar wasn't alone. The company's announcement set off a surge in most other solar power stocks as well. My favorite (for reasons I'll soon explain), SunPower Corp., currently has a market cap of $3.2 billion, but recently reached a peak valuation of $10.4 billion – and seems to be headed in that direction again.

SunPower is majority owned by Cypress Semiconductor. And, of course, Cypress is run by one of my favorite people, T.J. Rodgers. Even if you know nothing about Silicon Valley or the semiconductor industry, you've probably heard of T.J.

He is easily one of the most controversial figures in American business and a lightning rod for everything people who hate business hate about business. Needless to say, we reporters love T.J., because he's always good for an outrageous and inflammatory quote.

T.J. is an unapologetic capitalist and an absolutely ferocious competitor. During the early 1990s, when the tech world, and especially chip companies, was suing everyone in sight over intellectual property, T.J. alone refused to cave in to the blackmail and sign licensing deals. He fought every single suit, bar none, and then wallpapered his office with copies of the complaints.

Then there was the nun, Sister Doris Gormley of the Sisters of St. Francis of Philadelphia, who, acting as a social activist, wrote to Rodgers asking him to put more women and minorities on Cypress's board. T.J., a pure meritocrat who happens to be one of the great supporters of allowing more trained immigrants into the U.S., politely told the Sister to go to hell.

He later did the same thing to Jesse Jackson.

T.J. also came up against his own industry's joint venure project, Sematech, arguing that the government's money would be more wisely placed if it were broken up into small pieces and invested into new start-up companies. And, most recently, T.J. was back in the news battling the closed membership of the Dartmouth College Board of Trustees. His efforts in the last fight, along with Hoover Institution fellow Peter Robinson, set off a national debate about academic oversight that continues to this day.

So, it goes without saying that when the word "green" comes to mind, T.J. Rodgers, the ultimate free market libertarian, is probably the last person you'd ever think of. And yet, here he is, at the absolute epicenter of the Green Revolution, helping lead the charge that will likely very soon make solar power as inexpensive as other sources of electricity.

And SunPower is rapidly becoming a more important business to Cypress than semiconductors themselves.

The story of how T.J. got to this point is one of the great untold business stories of the new century. And it should serve as an object lesson to those who wish to change the world by fiat, rather than by market forces. A column is too short a space to tell it all, but I can give you a quick summary.

In 2001, at the very moment when the chip industry was sliding into one of the worst slumps in its history, T.J. went before the Cypress board and asked its permission to purchase, of all things, a solar power company. Needless to say, the board was skeptical – even more so when it turned out that the solar company was owned by one of Rodgers' grad school buddies.

When the board resisted, T.J. went ahead and invested $750,000 of his own money to keep SunPower afloat. In the end, it took 15 months, basically, until the chip industry began to turn around — before the Cypress board agreed to invest $9 million into SunPower.

But what T.J., who just happened to have invented one of the basic chip fabrication formulas (VMOS), understood that his board, his industry, and most of the rest of the world didn't appreciate, was that in its heart the solar power business was in fact a semiconductor industry.

It didn't start out that way, but look at today's solar electric panels: Most are made using semiconductor-thin film technology that is a direct descendent of the pioneering work done by companies such as Fairchild, Motorola and Texas Instruments in the late 1950s and early 1960s.

What those guys were trying to do was take the greatest product of the age, the solid-state transistor, and figure out how to make it smaller and easier to reproduce. They did so first by making it flat (Noyce's and Kilby's integrated circuit), then turning it into a kind of printing technique (Hoerni's planar process).

A decade later, one of the scientists who worked with Noyce and Hoerni, Gordon Moore, by then co-founder of Intel, realized that this miniaturization/mass-production technique was advancing at a rate never seen before in human endeavor. This formulation was the famous Moore's Law, which defines the modern world.

Most of us now understand, and appreciate, Moore's Law, but in the semiconductor industry they live it every day. And T.J. is one of the best of them. And what he saw in SunPower was the impending arrival of Moore's Law to the alternative power world … and more than anyone, he knew what that meant.

As he has admitted, what he saw wasn't Green, as in environmentalism, but "green," as in money. That's why he made such an unlikely move — and why he is now an even richer tycoon.

This takes a singular combination of vision, guts and the kind of strategic thinking that is only found in real, business-oriented entrepreneurs – not in government bureaucrats, or, for that matter, reporters.

The husband of a woman I grew up with has worked for T.J. for many years in international sales. It's been a good job, so when I heard a few years ago he was being transferred to SunPower, I felt sorry for him, figuring it was a demotion. These days he's adding new wings to his house.

You may not like their politics, or their attitude, or their style. But if we really do have an energy revolution in this country and free ourselves from our addiction to fossil fuels, it will be because of hard-charging, take-no-prisoners entrepreneurs like T.J. Rodgers — not UN committees, environmental groups, or government officials.

This work is the opinion of the columnist, and in no way reflects the opinion of ABC News.

Michael S. Malone is one of the nation's best-known technology writers. He has covered Silicon Valley and high-tech for more than 25 years, beginning with the San Jose Mercury News, as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, the Economist and Fortune, and for two years he was a columnist for The New York Times. He was editor of Forbes ASAP, the world's largest-circulation business-tech magazine, at the height of the dot-com boom. Malone is the author or co-author of a dozen books, notably the best-selling "Virtual Corporation." Malone has also hosted three public television interview series, and most recently co-produced the celebrated PBS miniseries on social entrepreneurs, "The New Heroes." He has been the ABCNEWS.com Silicon Insider columnist since 2000.