Asianometry has an interesting video up about East Germany expensive, strenuous efforts to catch up to the west in semiconductor manufacturing technology.
Spoiler: They didn’t.
Some takeaways:
“In the late 1980s, the German Democratic Republic, or East Germany, went all in on the monumental task of domestic semiconductor production. This semiconductor obsession failed, and the billions of marks spent on it eventually bankrupted the country’s failing economy.” I think he oversells the role the semiconductor push had on bankrupting the economy; everything in late commie East Germany was failing (just like the rest of the Warsaw Pact), they suffered a credit crunch for investment due to tightened western restrictions, couldn’t export Soviet oil as profitably due to the Reagan/Saudi created oil glut, and also were running into hard currency shortages to but the components their manufacturing sector needed to keep exporting.
The East German Uprising of 1953 kicked off what would be a persistent, and ultimately existential problem, for the GDR: Emigration. Throughout its history, its best and smartest people consistently sought a way out to the West. To convince its people to stay, the SED [Sozialistische Einheitspartei Deutschlands, AKA Socialist Unity Party of Germany] promised a better future through the use of technology. More than the Soviets, East Germany leaned on information technology as a pathway towards economic vitality and a glorious socialist future. The Party’s elites saw themselves locked in a technology race with the capitalists to see who can build a better society. Leader Walter Ulbricht called for an “industrial transformation” with the ultimate aim of “catching up with and surpassing capitalism in terms of technology.” A thriving computer industry was crucial towards making this ideology work. And in order to produce these superior computers, East Germany needed to learn and master microelectronics technology.
“Less than four years after the Americans invented the germanium transistor, East Germany moved quickly to build their own line of first generation semiconductors. In 1952, development work began at the VEB Works for Electrical Components for Communications Technology, or WBN, in the town of Teltow near the city of Berlin. This put them about even with West Germany. The FRG’s first semiconductor factory came about in 1952, built by Siemens.” Indeed, this is very early to get into the semiconductor game. It wasn’t until 1957 that Fairchild Semiconductor, widely considered as Company Zero for America’s semiconductor industry, was founded.
“WBN suffered from a lack of cooperation between its industrial and academic sides. The production teams lacked discipline, hands-on experience, and did not appreciate the scale and difficulty of the task they were facing. In one incident, the team dumped hot ashes right outside a factory window where they were producing a pilot run of semiconductors.” Ouch! A very uncleanroom…
“The state failed to give their young semiconductor team the resources it should have gotten. Administration – their chief accountant, in particular – seemed to care very little for semiconductors. When the team asked for money to purchase felt slippers to prevent static charge buildup in the clean room, their chief accountant denied the request.”
The Soviets didn’t help. “Despite being the GDR’s primary political backer, the Soviets were strangely wary. In 1958, two WBN staff members traveled to the Soviet Union to do technical exchanges. A year later, they came back complaining of limited cooperation. Much of what the Soviets had developed was created for military use. Thusly, the Soviets were concerned that transferring that to the East Germans would leak via scientists defecting to the West.”
They tried to get information from the U.S., but Cold War tech transfer policies were already falling into place. They had better luck in the UK. “Through the contacts of Arthur Lewis, a British Labour Party politician, the delegation saw plants owned by British Philips, Siemens-Edison, and British-Thompson-Houston. The latter is a descendant of the Vickers Company that sold oil equipment to the Soviets in the early 1900s. Just thought that was a nice connection. This visit was very successful. The East Germans learned a whole lot about industrial level semiconductor manufacturing. They even managed to purchase equipment for low-frequency transistors, a trailing edge technology.”
Despite that, the gap grew wider: “In 1958, WBN produced 100,000 germanium diodes, transistors, and rectifiers. Worse yet, some 98% of what they produced eventually needed to be discarded throughout their entire working lives.” Classic commie quality. “That same year in 1958, the United States alone produced 27.8 million transistors. Two years later in 1960, the US grew that production capacity five times over to 131 million.”
“Erich Apel, head of the Economic Commission of the Central Committee Politburo and an economic reformer – wrote in late April 1959: ‘Compared to … the American, Japanese, and West German industry, we lie in a state of backwardness that can scarcely be estimated … this backwardness will not decrease through 1961 at least, but will instead grow. Another inspection in 1960 identified more items of backwardness in semiconductor production. Workers tended to use rules of thumb rather than their instruments to measure. The various factory lines did not cooperate with one another.”
“Interestingly, when reporting these results to the Economic Commission of the Central Committee Politburo, that inspector softened his results. In his notes to state authorities, he said the GDR was 5 to 6 years behind. But in his analysis to the more politically charged Economic Commission, he cut it in half, 3 to 4 years.” Commies always institute thermoclines of truth to avoid being purged.
The brain drain to the west continued. The solution: The Berlin Wall. “For semiconductors however, the Wall pinched off what little technology the GDR had imported from the West.” The solution was to suck up even more to the Soviets, and to spy harder.
In 1963, the aging Walter Ulbricht launched a new initiative – called the New Economy System of Planning – to bring more market elements to the GDR economy. Now industrial groups, not bureaucrats, can actually decide how money can be spent. The reform also elevated the status of technology sectors like semiconductor manufacturing in the economy. R&D spending increased by over a third from 1959 to 1963. In 1965, nearly 40% of the electronics that the GDR produced by value were semiconductors – 82 million marks out of 223 million marks in total. Four years later in 1969, that number grew four-fold. Many of these transistors went into new consumer technical goods like radios, TVs and fridges. In 1971, semiconductor production reached 535 million marks by value. That year, East Germany began producing their first integrated circuits, some 10 years after Texas Instruments did it.
“Strange inequalities in policy planning meant that color televisions were widely available, but consumer items like toothbrushes and toilet paper were in short supply.” Communist planning at its finest!
One day in 1967, the Minister of Electrical Engineering and Electronics showed up to an East German electronics firm with a suitcase full of integrated circuits from TI. He told them to copy them exactly. The Ministry for State Security – better known as the Stasi – had been engaged in scientific and technology espionage since the 1950s – mostly related to atomic engineering and other sciences. Then in 1969, the Stasi’s Scientific and Technical Sector was reorganized and expanded with the goal of acquiring military technologies. After Honecker came into power in 1971, the Stasi’s job shifted from acquiring scientific knowledge to specific technologies – mostly via informants in the West who found and handed the goods over to East Germany. One such informant was Hans Rehder, a physicist working for the West German firms Telefunken and AEG. He handed over technical secrets for over 28 years and was never caught.
“Western companies knew about this copying of course. In one famous example, a GDR chip analyst looking at a stolen chip from the US firm Digital Corporation saw a message n Russian, roughly translating to: ‘When do you want to stop to swipe. Own design is better.'”
Stasi intellectual theft kept them from falling further behind, but couldn’t close the gap. “Because the Stasi were spymasters not technical experts, they frequently asked for the wrong item. Their methods of laundering the technology before passing it on made it harder to understand how to use it. Tightening embargoes from the West also interfered with industrial development. Stolen Western products got progressively older and more expensive to acquire. The embargoes gave other countries the chance to scam the Stasi, adding mark-ups frequently in the range of 30% to 80% to even 100%. This drained the East Germans’ already limited R&D budgets.”
“The wholesale copying also undercut the country’s ability to export its goods abroad. The Stasi did not want other countries to see what they had managed to acquire. And had they tried anyway, sales would have been blocked on patent infringement grounds. And finally, semiconductors were getting to the point that East German technicians struggled to replicate them. As early as 1976, an IC’s physical form no longer yielded secrets on how to produce them.”
“In 1981, with the GDR still about 7-10 years behind the West in microelectronics development, Erich Honecker announced a ten-point program to produce the majority of its semiconductors domestically by 1985. The 1970s were rough years for the GDR. Tighter export bans. The Oil Crises of the 1970s. Heavy borrowing from the West. Declining productivity and worsening competitiveness. It was all weighing heavily – grinding the country’s economy to a halt. Gerhard Schürer, head of the State Planning Commission, convinced Honecker that investing in semiconductors would bring the country out of its economic morass.”
They even struck a deal with Toshiba.
In exchange for 25 million marks, Toshiba – a long running technology partner with the GDR – would furnish the GDR with designs for their 256 kilobyte memory chips along with instructions on how to produce them. At the time, 256-kilobyte was leading edge stuff. The GDR was still struggling to produce 64 kilobyte memory. This would have been a game-changer. But in 1987, Toshiba got caught selling submarine propeller equipment to the Soviet Union. Huge scandal back then. Afraid of getting caught again, Toshiba offered the Stasi a 95% refund to destroy the evidence. [Spy Gerhardt] Ronneberger agreed. So in July 1988, he got the money back and dissolved the chip designs in a vat of acid in front of Toshiba’s people. But never trust a spy! Those were just copies, produced for exactly that purpose.
Finally in September 1988, Zeiss General Director Wolfgang Biermann triumphantly presented Erich Honecker with the first samples of that 1 megabit chip – the U61000. Honecker said that the chips were “convincing proof that the GDR is maintaining its position as a developed industrial country.” This technical “triumph” was the bitterest of them all. In semiconductors, prototypes mean nothing. Production means everything. Dresden produced just 35,000 chips throughout the entirety of 1988 and 1989 with a yield of 20%.
To say this was “piss poor” would be an understatement. Those are ruinous, “fire everyone” numbers for actual semiconductor manufacturers.
They planned to scale up to 100,000 1 megabit chips each year. Toshiba alone produced that many in a single day. Two months later in November 1988, the leading edge moved once more. Toshiba began shipping its 4-megabit DRAM in high volume, seeking to produce a million chips a month by March 1989.
Then history happened. “By then, the East German economy was in shambles, scheduled to default on its debts by early 1990. It never even got there. In May 1989, Hungary opened its borders with Austria and East Germans swarmed through there en route to West Germany. Later in November 1989, a year after its one megabit technical triumph, the Berlin Wall fell.”
East Germany stole as many designs as they possibly could, but they couldn’t steal the intellectual expertise behind the numerous process tweaks, nor the furious swarm of technological innovation drive by Silicon Valley’s capitalist high risk/high reword startup culture that drove Moore’s Law for decades.
Top-down communist command economies never had a chance to keep up.