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The Two Carl Zeisses
Author’s note: If you want to watch the full video, it’s below
I am a little disappointed by how this video did. I really thought that it was an amazing story about the two Carl Zeisses and their experience during the East Germany communist era.
I never got to talk more on this, but how East Germany structured its economy is pretty fascinating to me. The concept of these massive Kombinate reminds me in some ways of today’s tech giants - economy-spanning conglomerates with broad operations in a variety of fields.
I want to do a video about East Germany’s semiconductor failure but it does not seem likely. Near the end of the Soviet era, East Germany’s tech sector was commanded to build up capacity in semiconductors. While in some ways they saw impressive gains, these efforts were stifled by the regime’s need for political compliance - i.e. Are they politically okay? - and the overall aura of secrecy that seems to overshadow everything in the Soviet Union back then. I cannot really say that’s an environment conducive to advanced technological development.
In other news, I forgot to hat-tip but a few weeks ago I had the pleasure of coming onto Kalani Scarrott’s wonderful podcast Compounding Curiosity. In this podcast, I talked more about my own work flows and values rather than in a particular topic. So no discussions of EUV or a boom-bust or what not.
However, I am impressed with Kalani’s thoughtful questions, preparedness, and just how well-read he is overall. Other episodes are evergreen listening.
For nearly half a century, there were two Carl Zeisses. One based in the Federal Republic of Germany, or West Germany. The other in the German Democratic Republic, or East Germany.
Wait. Is "Zeisses" a word? I am not sure if it is. Whatever.
The Carl Zeiss of today is the Western German variant. Their work in lithography and EUV sits on the cutting edge of what is possible in nanoscale technology.
But the Carl Zeiss of East Germany was fascinating too. It grew to be a massive industrial conglomerate, doing cutting edge research into optics, military tech, and semiconductors.
In this video, I want to step away from Asia once more and look at a fascinating history. One of Germany's most iconic companies, split in two between East and West. Capitalism and Socialism. Let's go!
Carl Zeiss Before World War II
We do not need the whole story on Carl Zeiss, the man or the company. Here is an abbreviated history on things up until World War II.
Carl Zeiss was born in 1816 to a family of artisans. He started a workshop and that workshop repaired university equipment, made microscopes, and sold scientific instruments like eyeglass lens and thermometers.
In 1866, Zeiss recruited Ernst Abbe, a brilliant 26-year old physicist from the University of Jena. Abbe's insights on the movement of light rays through microscope lens helped the company to move beyond crude trial-and-error manufacturing and gave it a leg up on its competitors.
After Zeiss's death in 1888, Abbe purchased sole ownership of the company from Carl's son. He then transferred his ownership to what is now called the Carl Zeiss foundation.
The foundation has no owners or shareholders. Its purpose was to guarantee the company's existence after Abbe's death and that its employees can partake in its economic success.
The foundation's guidelines outlined social reforms like health insurance, pensions, profit sharing, equality in hiring decisions, overtime pay, and 9-hour work days. Excess profits would be invested in the working population of Jena.
Critically, Dr. Abbe wrote in a provision saying that the company's seat of operations should not be removed from the city of Jena. This provision cannot be modified. But Abbe didn’t know about World War II.
World War II
At the end of World War II in April 1945, the US Army first arrived at and occupied the city of Jena. But the city fell within the Soviet zone of influence. So the United States had to withdraw from the area in July of that year.
By then Zeiss was already an industrial crown jewel. As part of a policy to bring leading German scientists under American control, the Americans quickly spirited away 120-130 (the exact number is unclear) of the company's top technicians and execs. They would be resettled in the West German city of Oberkochen.
The Americans promised the Zeiss workers that their papers and equipment would soon follow, but those got shipped to the States. Whoops.
Once they arrived in Oberkochen, the small group of managers and scientists began starting up production. They formed a new company called Zeiss Opton, with the majority of the stock issued to the Zeiss Foundation.
Regarding Abbe's Jena provision, the state government of Baden-Wurttemberg simply issued a decree to add a second domicile. This essentially allows the Zeiss Opton managers to assume control of all of the Foundation's assets outside of the Soviet zone. Unprecedented, but then again these were unprecedented times.
A few Zeiss employees voted not to abandon the Jena plant. After all, Jena was their home. They may have also believed that they could work with the Soviets. Or that the Soviets would never dare try to dismantle the world-famous Zeiss factories. It was not an uncommon attitude at the time, with the Soviet occupation an unknown quantity.
The Soviets Arrive
Well, the Soviets did it. Twice. On July 9, 1946, the Soviet Council of Ministers ordered the complete dismantling of the Zeiss factories. The equipment, along with 300 former Zeiss employees, would be sent to the city of Krasnogorsk, a center for Soviet military optics research.
The Soviet Military Administration in Germany appealed to Stalin, and the Man of Steel ordered the Council to leave a small part behind. The council agreed to leave 6% of the factories' capacity.
What the Soviets did to Zeiss was not all that unusual. For an amazing chronicle of this time period, I recommend Anne Applebaum's "Iron Curtain: The Crushing of Eastern Europe 1944-1956". Really, go read it.
Anyway. Before the Opton management board left, they appointed some care-takers in Jena to act in the company's interests. For a brief amount of time, the two companies - Opton and Jena - and their boards agreed that the Jena caretaker board would be the sole representative of Carl Zeiss, the former corporate entity and foundation.
Both parties agreed to do this so not to agitate the Soviets into expropriating what was left of the company's assets. There also might have been some blackmailing going on behind the scenes by the Soviets - attempting to use the Opton board members' prior involvement in Nazi war crimes to pressure them into accepting full power of attorney from Jena.
This facade ultimately failed. Zeiss rebuilt some of its Jena factories but in 1948, the new German state expropriated all of the Foundation's assets without compensation. A new state-owned enterprise called VEB Carl Zeiss Jena took over the assets.
VEB meaning Volkseigener Betrieb, or state owned enterprise.
Will The Real Carl Zeiss Stand Up
So! Here is a philosophical question for you. Carl Zeiss used to be one corporation owned by one foundation. Now you have two companies and two foundations in two parts of the world. Both of them claiming to be the One True Carl Zeiss.
You now got some sort of weird Ship of Theseus situation going on. Both of the companies essentially had to start from zero. Both had critical members of the old company working for them. Both claim to be the real Carl Zeiss with the backings of their respective governments. Which one do you believe?
What happened next can be seen as a microcosm of the Cold War. Starting in the 1950s, the East German regime took control of the old Carl Zeiss Foundation entity and began claiming identity and control of the Zeiss trademarks.
Remember, this East German foundation is by now essentially an empty shell - the corporate assets and employees are now actually part of VEB Carl Zeiss Jena, the state-owned enterprise. The East German Zeiss Foundation exists for the sole purpose of staking claim to the old Zeiss trademarks.
The two firms battled it out in court over the next few decades. As you might guess, the Western courts backed Zeiss Opton, the West Germany version, while the Soviet Bloc courts backed Zeiss Jena, the East Germany version.
The legal intricacies are pretty fascinating to me, and I recommend "Zeiss vs Zeiss" by Isaac Shapiro if you want to learn all those nitty gritty details.
But I am going to skip all that and tell you the ending. After nearly two decades of litigation, the two companies split the world in half and agreed not to use the Zeiss trademark in each other's half of the world.
They can still operate there, just not use the Zeiss name. Zeiss of West Germany would use the name Opton in Eastern Bloc countries. Zeiss of East Germany went with something called "ausJENA" in Western bloc countries.
VEB Carl Zeiss Jena
There is little information out there about VEB Carl Zeiss Jena. While Zeiss Opton carried on in the optics field, VEB Zeiss Jena would eventually grow into a massive technology conglomerate.
For a while after its reorganization, Zeiss Jena attempted to build proficiency in the sciences and engineering. There were some successes. They exhibited a special new electron microscope in 1952, and in 1955 built East Germany's first working computer, the Oprema.
The "Optikrechenmaschine" or "Oprema" was for lens systems calculations. It had been in the planning since 1946.
It was a relay computer, which means it used electrically operated switches to do calculations. With its 8,313 relays, it had a clock speed of about 100 hertz and could perform square root operations in 1.2 seconds.
That being said, the company only made two and the machine's relay technology had already been superseded by vacuum tube computer technology at the time of its release.
In the 1960s, the ruling Socialist Unity Party of Germany or SED, shifted the company's direction towards pure engineering. But due to import restrictions and supplier difficulties, the company fell behind its Western competitors. Substantial quality control issues emerged as early as 1960. By 1968, the company was essentially bankrupt.
In the 1970s and 80s, SED gradually reorganized the East German economy into massive conglomerates, called Kombinate. Zeiss Jena found itself with integrated control over many other smaller VEBs. The new Zeiss conglomerate was instructed to conduct R&D on a variety of new technologies including robotics, computing and most importantly, microelectronics.
Around this time, SED and the rest of the socialist bloc were growing very concerned about the West's rapid advancement in semiconductor technology.
The Zeiss Kombinat's most primary task would be to leverage the company's expertise in optics to built advanced photolithography equipment for the country's indigenous semiconductor industry.
The task was given to Zeiss Jena's director Wolfgang Biermann. An uncompromising, authoritarian leader with an indomitable will to succeed, he ran Zeiss like a virtual state within a state. And since he had a seat on the SED's Central Committee, he had an unusual amount of political leeway.
Under his leadership, Zeiss Jena production doubled despite the labor force staying the same size. 60% of its products were made for export, and it was the only Kombinat with a sales office in the US.
The company was even the global leader in the planetary optics space.
However, he and the company failed to reverse East Germany's declining competitiveness. Despite successfully producing lithography equipment for its sibling conglomerates, the country's semiconductor efforts as a whole during this period fell short of those in the West and Japan.
Decline and Collapse
Going into the late 1980s, the Zeiss Jena Kombinat employed nearly 70,000 people in 25 subsidiaries. It was the second largest Kombinat after VEB Robotron, East Germany's largest electronics manufacturer.
As the Soviet Union's own native capacity declined, the GDR ordered the conglomerate to expand its military industrial production from 15.7% in 1983 to 28% in 1990. They made some great products at this time like an optoelectronic homing head for an air-to-air missile and a rangefinder for a T-72 tank.
However, Soviet demand for military technology vanished in 1986 after Gorbachev's disarmament policies came into effect. Zeiss Jena realized that it needed to switch directions again and prepare for a future opening up of the economy.
At the time of the fall of the Berlin Wall in 1989, Zeiss Jena was working on the production of its 1 megabit memory chip: the U61000.
German reunification happened in October 1990 and it was a mess. Officially, East Germany dissolved itself and added its former properties to West Germany. And that is a befitting metaphor to what happened to the two Carl Zeisses.
It was a hard time for everyone back then. East German industrial output fell by 51% year over year. Three million east Germans lost their jobs.
The Zeiss Kombinat split apart shortly before reunification. 12 of its 25 constituent companies were spun off unto their own. Many of those companies immediately shed thousands of jobs. The remaining 13 companies were renamed Jenoptik Carl Zeiss Jena.
In 1991, Zeiss Opton acquired Jenoptik Carl Zeiss Jena's microscopy and optics divisions. This essentially reunited the pre-war Carl Zeiss firm. However, the new company turned multi-million D-mark losses as it tried to digest this massive influx of workers amidst new competition from Asia. Despite state support, the company still shed hundreds of jobs over the next few years.
The leftover bits of Jenoptik Carl Zeiss Jena, renamed to Jenoptik as it was no longer associated with the old Carl Zeiss company, was a diversified technology firm employing nearly 7,000 people. It operated in semiconductors, laser optics, and automation.
At first it was in danger of collapsing. But then the government stepped in, buying 80% of the assets and saving thousands of high paying jobs.
Guided by Dr. Lothar Spaeth, former Minister-President of Baden-Württemberg, Jenoptik prudently grew through acquisition over the next decade.
In 1998, they conducted a $400 million USD IPO.
Jenoptik is doing well today, valued at over a billion dollars.
Zeiss Jena took a really interesting path through history after its split from Opton. The company encountered substantial challenges throughout its 40+ year history.
The socialist party structure kept employees from reaping the economic benefits of their own discoveries.
Import restrictions from the West prevented Zeiss Jena from getting their hands on Western technologies, especially in microelectronics, and forced them to do all it themselves. This was a crucial difference from the countries of East Asia, which were allowed to acquire and absorb technologies from the West.
Enforced by the Stasi, an atmosphere of excessive security impeded the company from doing its best work. Workers could not speak about what they were doing, and they were promoted based on their ideologies, rather than their merits.
Yet despite this, the company managed to do amazing research - filing as many patents as its West German brother. It became a global leader in certain industries. And it was one of the few East German companies to emerge from reunification largely intact.
The whole era of Zeiss Jena's attempted modernization was pretty fascinating to read about. Perhaps I will do a future detailed dive into East Germany's semiconductor space and why that failed. Let me know if that is something interesting to you.