CEO Interview: ON Semi’s Keith Jackson

In 1999, Motorola spun off some of its less profitable semiconductor operations. Those cast-offs became On Semiconductor. Motorola kept its nominally more valuable chip operations for a little while longer, but spun those off, too, a few years later, in 2004. That operation became Freescale Semiconductor.

Keith Jackson is an engineer who worked for some of the most prominent chip companies in the business. He joined Texas Instruments in 1973, then worked at National Semiconductor, Tritech Microelectronics, and finally at Fairchild Semiconductor before joining On in 2002.

Through the ensuing years, Freescale had all sorts of ups and downs, and was ultimately merged into NXP in 2015. Meanwhile, Jackson and On Semi just kept quietly plugging away, gradually buying one semiconductor operation after another, including a former LSI Logic fab in Oregon, AMI Semiconductor, Catalyst Semiconductor, California Micro Devices, Sanyo Semiconductor, and his old stomping grounds, Fairchild Semiconductor.

Last year, in 2019, On acquired Quantenna and also a 300mm wafer fab from GlobalFoundries. The company now has one of the broadest portfolios in the business, is global, has a little more independence than most of its peers given its manufacturing facilities, and for the past couple of years has been floating around the cutoff point for the Fortune 500.

Jackson has been involved in the industry for close to 40 years, and in September he announced that’s just about enough. He is retiring and plans to step down next year in May. Junko Yoshida and I caught up with him in his office. That’s a bit of a rarity during the pandemic. Here’s Junko:

JUNKO YOSHIDA: I’m wondering, what was the strategy for On Semi to actually buy up so many different manufacturing capabilities over the years? Why is that?

KEITH JACKSON: For digital, that moves very quickly and is lithography-driven. And so for that, we go outside. We use all the foundries for our digital, just like everyone else does. But from a cost and a technology perspective, the analog and power products are still much better off under your control, making sure you can basically tweak or optimize processes for your analog products and get good cost scale for your power products. So it’s really all about the markets you serve, and like everybody else, our digital comes from foundries.

JUNKO YOSHIDA: I was looking at the company history and looking at all the announcements you guys made over the last 19 years, and I realized: Holy moley! You guys had a lot of mergers or some sort of acquisition agreements, not big ones, but little ones, over the years. I counted more than 20 of them. Right?

KEITH JACKSON: There have been quite a lot.

JUNKO YOSHIDA: Yes. Quite a lot. Among them, which ones do you consider were more consequential to who owns any eats today?

KEITH JACKSON: All our acquisitions have been aimed at bringing more technology capability to the company. Back to that vision of being a systems supplier and accelerating our time to that point by picking up companies that had already developed those competencies. I think the first most impactful was AMIS, which brought us the mixed signal capabilities and a lot of automotive content, which is one of the markets we were after. Very substantial for us.

And then the other one that everybody’s very familiar with is Fairchild, which really gave us a leg up in the high-power portion of power products, the high-voltage portion of power products. So those two are probably the most impactful, but each of the companies that we’ve acquired has contributed to our competencies so that we can continue evolving the portfolio.

JUNKO YOSHIDA: You actually cast a very wide net. I was surprised. Forgive my ignorance, but I was looking at the document. You actually cover a lot of ground. And it’s not just analog or mixed signal, we talk about CMOS, CMOS sensors; you talked about the automotive. Definitely On Semi is right up there among several leading image sensors. I guess On Semi’s chips, these image sensors are driving all the Teslas. Is it not? Tesla Model 3?

KEITH JACKSON: We’re by far the largest supplier of sensors for automobiles. Image sensors. And now we’ve added lidar into that equation. So we continue to push the front edge there for autonomous driving.

JUNKO YOSHIDA: And also radar. The Millimeter Wave thing from the IBM Haifa I guess?

KEITH JACKSON: Yes. In Israel. Yes. They’ve got radar chips out there now, and they’re not in cars yet, but we’re in the design-in phase.

JUNKO YOSHIDA: If you look at the history of the company, it’s kind of interesting to me because I do remember we were writing a story about how part of the Motorola semiconductor group is going to be called On Semi. Right? And several years later, Motorola also spun off Freescale. And Freescale really made itself known as a big automotive chip supplier. But here we are. There are two cousins — I don’t know how you… two offsprings of Motorola have two different histories, two different trajectories. But then when you look at some of the hottest markets that two companies are pursuing (well Freescale is now part of NXP), but it’s sort of a similar market.

KEITH JACKSON: Well, certainly. Everybody’s pretty savvy in our industry, and you know where the big opportunities are. And that’s generally where you go.

JUNKO YOSHIDA: I was kind of curious. I brought up Freescale because Freescale merged with NXP and NXP was about to be acquired by Qualcomm. But then Qualcomm eventually walked away from the deal. So I’m wondering, Why was On Semi not part of the big M&A mania that we just experienced the last ten years? Did you guys actually have any talks with anybody?

KEITH JACKSON: We’ve been creating our own M&A, as you pointed out. So very active on the consolidation side. Haven’t had talks on the other direction.

JUNKO YOSHIDA: So it was always your… I guess your goal was to… rebuild is not the right word, but sort of grow On Semi as On Semi, rather than looking for somebody to buy you out.

KEITH JACKSON: Our vision really was to create a premier semiconductor company with the competencies that we thought would allow us to continue growing and setting our own destiny. And that’s the direction we’ve taken.

JUNKO YOSHIDA: If you give yourself a report card, where do you think you are? If you achieved your goal, it’s 100%. Where are you? Is it 70% or 80%? Where do you think you are?

KEITH JACKSON: I think we’ve done very well, but we still have a ways to go. We’ve really just been into the module side of the business for about three years now, and that’s growing extremely fast, but we see that primarily as the wave of the future. You can buy basically an entire module to do everything you need as a customer. And that kind of gets your time to market where you want it, rather than having to design your own. So we’re making good progress in that, but I’d say we’re maybe at the 70% mark. Still have a lot of room to grow.

JUNKO YOSHIDA: I see. If you look at the different parts… There are a lot of moving parts of a new company business. Are there any elements that you’re still looking for? Is there something you think you still need?

KEITH JACKSON: We’ve got all of the technologies I think we need to go from here. Always looking for opportunities to accelerate progress here or there, but we’ve got the technologies we need, and I think we have the access to the markets we really want to go after, which is automotive and industrial and IoT. I think we’re in pretty good shape from a strategic perspective. A lot of execution to do, and if there’s something else that’ll help us accelerate our path, always open to that.

JUNKO YOSHIDA: Let me ask you this: If you look at the markets you’re in, how do you compare On Semi with companies like Infineon or ST? I think they are also in the power business. It’s kind of similar areas. I could be wrong. How do you see yourself when you compared to your peers?

KEITH JACKSON: Infineon and ST are indeed competitors and have broad portfolios and have been on similar types of trajectories. We like to think we can differentiate ourselves in our capabilities, more efficient products, more complete products. At least for the markets applications that we focused on, really it’s all about beating them on the quality of the product and the ease of use.

JUNKO YOSHIDA: That’s good. I’m going to switch gears a little bit. I understand, Keith, that you became the Chair of SIA last year, right?

KEITH JACKSON: That’s correct.

JUNKO YOSHIDA: What exactly does an SIA Chair do?

KEITH JACKSON: Well, really the job is all about bringing the industry leaders together for a common purpose for the industry. Working with governments, both here domestically and internationally, to make sure that we’re creating an open environment for our semiconductor industry to thrive. That’s the basic structure, and then there’s just a lot of things that go on to make that happen.

JUNKO YOSHIDA: That’s a textbook answer. But if you look at what has happened this year so far, I think SIA has a number of really big challenges, actually, this year. Not just SIA. I’m talking about the semiconductor industry in general. In light of the fact that the trade war with China is accelerating. Whether you want it or not, that’s where the government is going. And then the spread of COVID-19, which we couldn’t really control. In light of the fact that all these outside elements — which, actually, I’m sure that consumed a lot of discussions within SIA. No?

KEITH JACKSON: Lots of discussions. Obviously back to what we’re trying to do as an industry is keep markets open. It’s a global industry. Our customers are global. And so big priority on making sure that stays open. But our talent is global also. So making sure that we can attract and recruit and retain people from all over the globe is a key priority. And then of course you mentioned COVID. Primary impacts there are around making sure we can keep our factories open and the essential goods flowing into all the markets that need that. So each of those elements requires a lot of time and energy to make sure we can continue to work on that issues.

JUNKO YOSHIDA: Are there still outstanding issues when it comes to dealing with COVID-19, in your opinion? As an industry?

KEITH JACKSON: No, I think the industry’s pretty much managed that. If you think for a moment about our industry, our products are so precise and they need such cleanliness that our factories have long been much safer than the outside environment. With the clean rooms and the HEPA filters and all the protocols we use to make sure our very tiny lithography products don’t have any types of foreign materials or anything airborne. We’re pretty safe. We spent several months this year convincing governments around the world of that, and they’re now all convinced. So we’ve got full work forces and turning out product. So I think that one is pretty much behind us.

JUNKO YOSHIDA: I see. You mean SIA included? The semiconductor industry made a concerted effort to sort of label itself as an essential industry so that you can keep open your business. Is that it?

KEITH JACKSON: It’s part of it. But also you have to have a safe industry. So it still does you no good to be essential if you can’t keep your workers safe. I’m just saying that we moved very quickly to ensure that all of our workers were safe and we had good protocols in place across the industry. So we’re not only essential, but we’re also a safe place to be.

JUNKO YOSHIDA: Another big issue that I want to talk to you about is the trade war with China. Where do we stand now? And do you think that SIA played a key role in making lobbying efforts and trying to gain federal funding and tax breaks to revive the U.S. chip manufacturing here in the U.S.?

KEITH JACKSON: They’re related but slightly different. We have worked very hard with the Administration and Congress to try and keep any type of restrictions to a minimum. So we spent a lot of energy trying to keep things as open as we can. Some progress, but obviously not as much as we would like. And then secondly, it does appear that there’s going to be longer-term trade frictions. So looking at supply chains, making sure that we can take care of all of our customers around the world. Definitely looked prudent to have some more advanced presences here in the U.S., so we worked again to get some bills across for investing in semiconductors back in the United States.

JUNKO YOSHIDA: Is that going to really happen?

KEITH JACKSON: I believe it will, yes.

JUNKO YOSHIDA: Does that have anything to do with the percolating idea of post-globalization? It is a global war, and yet every country should be in a position to take care of making their own technology. Is that the thrust of things? Or is it something different?

KEITH JACKSON: I think it’s more that certain countries certainly need to pay more attention to making sure they have a secure supply chain. Not every country needs to be completely vertically integrated. But you need to have comfort that you’re not going to lose access to very critical technology. And yes, I do believe it’s going to happen here in the U.S. I do think there will be more advanced factories built and more investments here that will take place as a result of all these actions over the next few years.

JUNKO YOSHIDA: That’s quite a change, when you think about it, from what we went through the last ten years, don’t you think?

KEITH JACKSON: Big change certainly in the United States. They have not supported industries to this extent before. Totally new ground. That’s not normally the way we operate. Many of the countries that we compete with around the world have a history of investing in their industries, but here in the U.S., we don’t. So this is actually a pretty significant change.

JUNKO YOSHIDA: What prompted that, do you think, in your opinion?

KEITH JACKSON: I think it really was concern over security issues on the future of technology. I think there was enough concern that collectively resulted in this being an opportunity.

JUNKO YOSHIDA: When you say “future of technology,” are you talking about the advanced semiconductor technologies that may… in the United States, for example, like DARPA needs? Or are we talking about something else?

KEITH JACKSON: Certainly the national security piece is a key player. That’s a key impetus. But really if you’re looking at artificial intelligence, at quantum computing, at the things that will really make a difference over the next ten years, those are very important to countries. And all of those factor in.

JUNKO YOSHIDA: But at the same time, manufacturing those chips, those processors, are really going to depend on TSMC coming to Arizona. No?

KEITH JACKSON: Certainly that’s a very big step and will be a big part of that equation.

JUNKO YOSHIDA: Changing your cap as a CEO of On Semi, do you expect to get considerable funding, given that your company acquired GlobalFoundries 300mm fab in East Fishkill, New York?

KEITH JACKSON: Yes. Certainly that is an opportunity. We’re going to be looking to expand there, put in new technologies and grow that site. So we hope to be able to take advantage of that, too.

JUNKO YOSHIDA: Brian, do you have some irrelevant questions?

ALL: (LAUGHTER)

BRIAN SANTO: I did want to back up with some valedictory questions. You’ve been involved in the semiconductor industry for a good long time. I’m wondering if I could get you to just recall some of the challenges that the industry as a whole went through. The ones that On Semi helped face. Maybe some of the ones that it didn’t. And then maybe then a look ahead at some of the challenges that you’re going to let the industry handle on their own after you go home.

KEITH JACKSON: I may ramble a bit, because there’s a lot that’s gone on. I’ve spent my whole career in semiconductors. And as you know, it’s really driven by innovation and innovative people. So over the years we’ve seen many challenges that have come up. We’ve seen challenges back in the ’80s from places like Japan that were doing a lot of investing just like you see from China today. And that made everybody quite worried. But the U.S. industry, again, continues to come together and do what needs to be done.

We’ve seen challenges over the years attracting new talent. So really bright university students have a lot of choices on what they want to study. And frankly, in the U.S. we had difficulty getting homegrown interest. So we had to do a lot of work to get the best and brightest from around the world. Those were challenges that we continue to work on.

Really the key thing that’s happened with semiconductors that has made us challenged and has shaped a bit of the industry and the consolidation is the capital intensity. So we can keep doing greater and greater and greater things, but it literally takes greater and greater and greater capital to make those things happen. In fact it’s not quite exponential, but it’s very, very significant.

So for the cost of one lithography tool today, you could have built an entire factory 20 years ago. That has really been an industry challenge to figure out how you grow fast enough and keep you profitability high enough to continue that pace of innovation. I think that’s one that’ll still be with us after I retire as well.

BRIAN SANTO: Excellent. With On Semi, one of the things the company has been noted for is operating ethically and responsibly. You’ve been named one of the most ethical companies in the world. You’re on that list. You’re involved in trying to do greener or more environmentally conscious engineering. From the standpoint of a lot of the financial people I have dealt with over the years, those seem to be “nice to haves,” not “real necessaries.” Do you feel the same way? And can you comment on steering a company in a direction that tries to behave responsibly as it can?

KEITH JACKSON: Certainly. This is not something that was externally put on us. We came from a tough beginning, if you will. The company had a limited portfolio and frankly was highly leveraged. So one of the things from day one I believed is, the key thing is creating trust. And the best way to create trust is to put ethics in all your dealings. Your suppliers need to trust you, your customers need to trust you, and your people need to trust you. The best way I know to do that is to set some ethical standards, set some expectations of how we treat people with respect and integrity. So that’s been part of the DNA since the first day on the company.

I think that what’s called ESG, or environmental governance and so forth is something that will become more and more important to investors. We’re seeing them write letters publicly and privately to companies now saying that’s more important to them. And I think over time it will. It’s really just a recognition of how important that is for creating trust with your communities and your people and everything. So I think that part is pretty straightforward. It’s just a long-held belief.

The energy piece, I think is also something that’s important. But more salient I think to On Semiconductor and the semiconductor industry is that it takes our technologies to really tackle the problems that you’ve got out there. You can’t have a solar system without semiconductors. You can’t have electric vehicles without semiconductors. Really it’s embedded in all the places we want to go environmentally as a world to protect our world. Again, a great match.

We’re pretty excited. We’ve been working at it for a lot of years. This is not some response that we’ve seen because we watched Harvard journal articles being written.

JUNKO YOSHIDA: That’s great. One last question, Keith. It is kind of unusual for the same person to stay on in the CEO position in the highly competitive semiconductor industry for almost 19 years. Why do you think that happened? It wasn’t like you were glomming on to the position. People wanted you to be there. And it’s actually brought some stability to the company, but it is a very unusual company, when I think about it.

KEITH JACKSON: I think one of the keys every CEO looks at is, What’s tomorrow going to bring? The key to my longevity, you’d have to ask the Board, but I will tell you that what I tried to do is make sure that every year we could look back and say, Here’s some great stuff. We’re a better company, we’re a bigger company, we’re more profitable, we’ve come out with new technologies. It’s really all about having the energy and vision to keep growing and changing and innovating. So that’s what drives me anyway. And apparently it’s worked for a while anyway.

BRIAN SANTO: So you were hanging around, you were on the scene with guys like Andy Grove and TJ Rogers and Charlie Sporck, and you were the kid, right?

KEITH JACKSON: I actually worked for some of them.

BRIAN SANTO: Did they treat you like the kid?

KEITH JACKSON: No they didn’t, actually. They were actually a pretty good group. And I don’t think they spoke to anybody like the kid. They definitely wanted to have people motivated and doing great things. I think they all built good companies.

BRIAN SANTO: Did you learn stuff from those guys?

KEITH JACKSON: A lot of stuff, yeah. A lot to learn.

BRIAN SANTO: Have you passed any of what you got from the people who went before to the people you’re grooming for maybe your job?

KEITH JACKSON: I definitely spend time trying to do that and making sure that everyone here that I’ve come in contact with has the opportunity to use painful lessons learned from the generation before. Hopefully that will stick.

BRIAN SANTO: Oh, you’ve got to tell us more! Painful lessons learned?

KEITH JACKSON: I don’t know if I’ll give you any specific anecdotes, but I will tell you, I’ve now been through I guess my eighth or ninth downturn in the industry. And every time there’s one of these world reactions as if it’s the end of the world, and life is coming to an end so you slash, you burn, you try to basically think you’re going to survive. And then, lo and behold, a year later, a year and a half later, you can’t fill your orders anymore. You can’t take care of your customers anymore because the world really doesn’t end. It really does go on. It really does recover. So if nothing else, just looking at setting up people to understand that there are cycles that are going to continue. You need to be prudent and do the right things in each part of the cycle, but don’t overreact. And certainly think about what you’re going to do when it comes back.

So as I’m leaving in ’21, I’ll tell you, it’s coming back. And I hope the next set of folks will be ready for that completely.

BRIAN SANTO: That was On Semiconductor CEO Keith Jackson, who recently announced he’ll be retiring next year. The company does not have a designated heir apparent. Here’s Junko asking him about On Semi’s succession plan, and his response.

JUNKO YOSHIDA: When I interview TI, when I interview Intel, every company, as big as these companies are, they actually do have a succession plan in place. What was your plan?

KEITH JACKSON: We have succession plans as well. We’ve been working with executives to prepare them for many years. But just from a best practice perspective, we’re looking both at those internal succession candidates and looking externally just to get a lot of comfort that we’ve got the best person going forward.

BRIAN SANTO: So… not much detail in that answer. Jackson was a little more forthcoming about the qualifications the company is looking for: someone able to set strategic direction, has operations experience, and is technologically savvy. But he declined to identify any likely candidates.