Founded by two engineers in 1991, Broadcom is a technology firm headquartered in Irvine, California. CEO Scott McGregor joined the company in January 2005. 

Tell us what business you’re in.
Broadcom is in the business of taking technology and ideas and turning them into silicon chips that form the basis of cool products like music players, digital television, cell phones, and switches that switch Internet traffic. 

When most people think of chips, they think of the kinds of things that go into a computer. But you make chips that go into many other kinds of products, right?
That’s correct. Semiconductor chips started off in the computer field but they have since been applied to many things. You can think of chips as the electronics that power many of the devices in homes. There was a guy who once said that in the future, computers will be so inexpensive you will have one in every doorknob. If you check into a hotel these days, that’s absolutely true. Semiconductor chips power everything from cell phones to wireless connectivity. 

And do you also make chips that talk to each other or that can coordinate several different kinds of tasks?
Absolutely. Broadcom is engaged in communication, which is our main thrust. Broadcom today is the leader in things like wireless LAN [local area network] and Bluetooth. So if you have Bluetooth in your cellular phone and you use it in your car or with a wireless headset, chances are that is the Broadcom chip. 

Do you make your own chips?
We design the chips. All the ideas and engineering that go into the chip are done by Broadcom, but the actual manufacturing of the silicon is done in Taiwan, Singapore, and other places. 

And why do you not make your own chips?
It used to be that if you were making semiconductors, you had to make your own chips. Originally, people viewed the process of making the silicon itself as a proprietary value-added part of the company. Over time, we’ve seen the emergence of pure-play foundries, which have very advanced processes that will make chips on your behalf. The advantage for using them is that it reduces your capital intensity. For a company like Broadcom, it means that we don’t have to spend $3 billion every year or two to build a factory. It gives us the ability to view the foundries as suppliers and we can have them compete for our business on the terms of best cost, best quality, best ability to deliver. 

So you’re really in the ideas business rather than in the manufacturing business?
That’s correct. We are approaching 6,000 employees, and 75 percent of them are engineers who do design work. And these chips are very complicated. A digital TV chip, for example, is sort of like a microscopic Manhattan, if you will, with that complexity of design shrunk down to something the size of your fingernail. 

In the mid-1990s, Broadcom really had no patents. Currently, you have over 2,500 U.S. patents. Tell us about this.
Broadcom has been very industrious in terms of filing patents based on a lot of great ideas. In our industry, patents represent technology that you have created and enable you to benefit from your inventions and your products. 

Are the patent laws working smoothly and productively as far as you are concerned?
The [U.S. Patent and Trademark Office] works very hard. The legal system we have in the United States tries to underscore the value of intellectual property. We have very well-developed intellectual property law and practices. 

We have seen rapidly accelerating product cycles. It’s very challenging for the patent office to keep up with that kind of pace.

The patent office has a lot of challenges in terms of the number of patents that are submitted. It can take them many years to get through a patent. And that can be a challenge in our business, where time to market can be measured in months. The life cycle of a cell phone from creation through its entire marketing and then, finally, retirement as a model in the market can be six months. 

We have seen rapidly accelerating product cycles. It’s very challenging for the patent office to keep up with that kind of pace. If you think to the time of the founding of this country, typical patents were for a mousetrap or for a zipper. One patent covered the primary essence of the device. A cell phone these days can have hundreds of devices that are part of it; each one of those can have hundreds of aspects to it. You could literally have a million or more patents that would apply to a single handset. 

Is there a mechanism for sorting out the thousands and even millions of patents that come together in a single device?
There’s the court system. The legal system in place is challenged, because many of the original laws and ideas were formulated when devices were simple. 

One phenomenon that some people in your business find particularly pernicious is the advent of trolls. Could you explain that to us?
Imagine you have a multibillion-dollar company that is faced with an injunction on their primary products from a single patent, which might be one of tens of thousands or hundreds of thousands of patents that might apply on their device. It is very painful to go through the litigation, especially if you risk having your products stopped from shipping. Quite often, companies would be forced to settle for millions of dollars, even if they didn’t believe the patent was necessarily valid, simply because they didn’t want to take the risk that it would impact their sizable business. We saw a number of people spring up who may or may not have had valid patents or legitimate challenges, but it was a lucrative market for people who were not in the business to threaten large companies.

There are more cell phones sold in China every year than in the United States, by a large factor. Any company that’s interested in technology has to participate in China.

Perhaps some were valid, but I suspect there are also others that saw it as a quick way to make a buck. So we’ve had some changes in some of the rulings. The recent eBay rulings have made it a lot harder to get injunctions. But we look forward to patent reform and are encouraged by some of the proposals coming forward. 

What has been your experience in China?
China is a fascinating country. They are graduating far more engineers in China than in the United States. It is also turning into a market in its own right. Instead of just being the place where you build everything, now it is also a place to sell things with the emergence of the middle class. An interesting statistic is that there are more cell phones sold in China every year than in the United States, by a large factor. Any company that’s interested in technology has to participate in China. 

Has Broadcom been hurt by policies in China that favor local producers?
I wouldn’t say that we’ve been hurt. We’re concerned about new standards that might emerge and encourage all of our industry to work closely with the Chinese government to find good solutions. I don’t see it as the most pressing problem. 

I think the problem is workable with the Chinese government. They seem to be open to encouraging trade, encouraging investment in China, and I think they are focused on the long-term development of the country. 

You mentioned the engineers China is producing and you also said that you have about 4,500 engineers. Do you have a hard time finding qualified engineers in the United States?
Our ability to find top talent is one of the primary things that limits our growth. The most exceptional engineers can do truly amazing things, and so our goal in Broadcom is to hire the top talent we can find, wherever it is. The majority of our engineers are in the United States, and we have in the past primarily hired there. We find it increasingly hard to find top talent, and so we have broadened our talent search. Now we are increasingly hiring outside the United States as well. 

How many of your engineers are in the United States, roughly?
I would say about two-thirds are in the United States. 

And do you think that there is some kind of public policy solution to this problem of getting more engineers?
There are a number of things that are important to focus on. First of all, the United States has an absolutely exceptional education system, especially with regard to advanced degrees in science and engineering. The United States has top quality in terms of the curricula, the professors, the institutions, and the graduates that come out of these schools. That’s very important to fuel the growth of the United States in the future as, increasingly, the world becomes intellectual property–focused in terms of creating all of these devices. 

One of the things I find frustrating is that in many cases we have foreign students come to the United States, and they will get one of these advanced degrees, perhaps a doctorate in electrical engineering. And because of the H-1B visa status, they have to go back to their original country. It’s ironic that we invest so much in educating them but then we will not let them work here. It forces Broadcom to look at hiring these people outside the United States, but it’s not clear to me that that is a good outcome for the United States. 

How does your company view trade?
It’s very important that we have open trade around the world, avoidance of punitive tariffs, and encouragement of innovation all across the world. That creates a great opportunity for us and other companies in our industry. Open trade remains a very important priority.