The company was founded in 1979 by a trio from Fairchild Semiconductor by way of Synertek - Jack Balletto, Dan Floyd, Gunnar Wetlesen - and by Doug Fairbairn of Xerox PARC and Lambda (later VLSI Design) magazine.
Alfred J. Stein became the CEO of the company in 1982. Subsequently VLSI built its first fab in San Jose; eventually a second fab was built in San Antonio, Texas.
VLSI had its initial public offering in 1983, and was listed on the stock market as (NASDAQ: VLSI).
Advanced tools for VLSI design
Thanks to its Xerox PARC heritage, VLSI was an important pioneer in the electronic design automation industry. It offered a sophisticated package of tools, originally based on the 'lambda-based' design style advocated by Carver Mead and Lynn Conway.
VLSI became the an early vendor of standard cell (cell-based technology) to the merchant market in the late 80s where the other ASIC-focused company, LSI Logic, focused on gate arrays. Prior to VLSI's cell-based offering, the technology had been primarily available only within large vertically integrated companies with semiconductor units such as AT&T and IBM.
VLSI's design tools eventually included not only design entry and simulation but eventually cell-based routing (chip compiler), a datapath compiler, and a state machine compiler. Few companies could match a few of these tools and none could match the breadth of VLSI's offering.
VLSI's physical design tools were critical not only to its ASIC business, but also in setting the bar for the commercial EDA industry. When VLSI and its main ASIC competitor, LSI Logic, were establishing the ASIC industry, commercially-available tools could not deliver the productivity necessary to support the physical design of hundreds of ASIC designs each year without the deployment of a substantial number of layout engineers. The companies' development of automated layout tools was a rational "make because there's nothing to buy" decision. The EDA industry finally caught up in the late 1980s when Tangent Systems released its TanCell and TanGate products. In 1989, Tangent was acquired by Cadence Design Systems (founded in 1988).
Unfortunately, for all VLSI's competence in design tools, they were a laggard in their semiconductor technology. VLSI's 1.5 µm technology was far from industry leading in either performance or density and VLSI had done virtually no work in developing a 1.0 µm library as the rest of the industry moved to that geometry in the late 80s. At the 11th hour (some would say 13th hour) VLSI struck a deal with Hitachi and finally released a 1.0 µm library (actually more of a 1.2 µm library with a 1.0 µm gate).
As VLSI struggled to gain parity with the rest of the industry in semiconductor technology, the clock was ticking on the viability of design tools tied to a single fab. Cadence was dominating physical design and Synopsys was dominating the exploding field of design synthesis. As VLSI's tools were being eclipsed, VLSI waited too long to open the tools up to other fabs and Compass Design Automation was never a viable competitor to industry leaders.
Meanwhile, VLSI poorly timed its entry into the mercant high speed SRAM market previously owned by Cypress and IDT as all the large semiconductor companies built high speed SRAMs with cost structures VLSI could never match. VLSI quickly withdrew taking a huge loss.
Similarly, VLSI sat on the early Acorn processor technology for years without even investing in a working C compiler. ARM Ltd was formed in 1990 and VLSI became just one vendor of the powerful ARM processor after ARM finally funded their own tools. Lack of funding had squandered VLSI's years of monopoly of the Acorn RISC machine. However, it must be noted that VLSI's extensive market research found little interest in the ARM. This may explain VLSI's reluctance to invest in a working C compiler, although the development of such a compiler would surely have been the responsibility of the processor design company - Acorn. In fact, despite the addition of further licensees, the ARM processor enjoyed little market success until GSM came along. Ericsson adopted the ARM processor for its GSM handset designs in the early 1990s. It was the GSM boost that made ARM the company/technology that it is today.
Only in PC chipsets, did VLSI dominate in the early 90s. This had been a minimally supported product developed by five engineers that led to a huge business for VLSI that almost equaled its ASIC business in revenue (much more profitable initially) but VLSI eventually ceded the market to Intel (VLSI's eventual chipset partner).
VLSI also had an early partnership with PMC, a design group that had been part of British Columbia Bell. Instead of merging with PMC and developing a double poly process, the telecom management at VLSI opted to go it alone. They struggled to design chips as simple as a single T1 LIU in multiple spins (eventually giving up) as PMC eventually merged with Sierra and formed the ultra successful PMC Sierra, one of the most important telecom ASSP vendors in history. Once again, a toxic brew of incompetence let them down.
Scientists and innovations from the 'design technology' part of VLSI found their way to Cadence Design Systems (by way of Redwood Design Automation), Synopsys (by way of Compass Design Automation; was sold to Avant! Corporation, which itself was recently bought by Synopsys.
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