SILICON VALLEY TIGHTENS UP : TECHNOLOGY FIRMS LOSE OPENNESS IN CRIME WAVE.

Byline: Raoul B. Mowatt, Dean Takahashi and Brandon Bailey Knight-Ridder Tribune News Wire

For two years, Piiceon Inc. and its employees have been under attack: two armed robberies. Two burglaries. Three attempted burglaries. Theft by a once-trusted employee. Two burglaries at subsidiary offices in England.

After more than $1 million in losses, the San Jose memory-module manufacturer now fears the latest tactic of increasingly violent high-tech thieves: kidnapping executives and forcing them to compromise their company's security.

It's come to this: For their safety, Chief Executive Officer Art Fonda and Vice President Jeff Anhorn wear ``panic buttons'' around their necks. Although the off-white disks tethered to a silver chain allow them to summon police in an instant, they don't provide complete peace of mind.

``I have to watch behind me to see if I'm being followed,'' Fonda said. ``It's all really repugnant to me. . . . It's putting a sour note on Silicon Valley.''

As the high-tech industry has skyrocketed, so too have the violence, appetites and sophistication of chip thieves. The problem is so widespread that law enforcement officials estimate it adds perhaps $150 to the cost of a $2,000 to $3,000 personal computer system.

This underside of the technology revolution has brought fundamental change to Silicon Valley. It has altered the way workers and executives do their jobs, while forcing many firms - from start-ups to corporate giants - to abandon the openness and trust that have characterized this valley for so long.

In an area blessed with remarkably low crime rates, firms are rushing to install more and more stringent measures to protect themselves. Employees now have to forgo little freedoms in the name of security: Things such as the ability to work as late as they want or not have their personal belongings inspected.

And most of all, some employees and executives express a pervasive fatalism and helplessness, fearing that they will be the next victims of robberies, shootings and abductions.

``I've thought about getting out,'' said a manager at another high-tech company. ``But it's what I do. It's hard to find any electronics company that isn't a potential target. It's a sick feeling, knowing that someone is watching you and following your every move.''

To be sure, the casualties of this Silicon Valley warfare are atypical. Few thefts are violent. Employee pilferage is responsible for more than half the losses. Next come burglaries, in which thieves do not physically threaten anyone.

The last three years, however, have been marked by a wave of violent robberies. Though no one has been killed, gunmen have tied up and brutalized workers at scores of firms.

Police and federal authorities have fought back with undercover investigations, including West Chips, an 18-month operation concluded in February in which 112 people were arrested, and Bytes Dust, which ended in April with 40 in custody.

During the height of the crime wave last year, insurance company officials estimated Silicon Valley firms were losing $1 million a week. Since the recent arrests, authorities said, they've had no robberies and only a few significant thefts.

But as the violence escalates, the first slaying during a chip robbery is inevitable.

Many experts said they believe this crime will be an economic and emotional problem as long as companies continue to produce and to assemble the valuable, cutting-edge computer technology that society depends on.

Fear was not always part of the Silicon Valley way of doing business.

The late David Packard, co-founder of Hewlett-Packard Co. in Palo Alto, believed in trusting employees. He once ordered managers to remove locks from storerooms and laboratories. Company headquarters were designed to foster an ``open campus'' atmosphere to encourage workers to brainstorm as though they were attending college.

``Silicon Valley is a nice place,'' said Frank Johns, managing director of Pinkerton Risk Assessment Services in Alexandria, Va. ``People did tend to be more open, more trusting than other metropolitan areas where you tend to look over your shoulder and everyone's a potential thief.''

Now at H-P campuses, you'll see guard shacks, cameras, sensors and doors that require photo identification for entry.

Success attracts vultures. And there have been few success stories in recent years like the valley's electronics industry. Last year, chip sales hit a record $145 billion, according to the Semiconductor Industry Association, a tenfold increase in 15 years.

Just as the industry has grown, so has high-tech theft, a nearly perfect crime.

Many computer components, often the size of a thumbnail, are worth more than their weight in cocaine or gold. They are legal to possess, easy to conceal and effortless to transport. Because chips are so plentiful, tracking systems are rare and ineffectual after the first sale. Until recently, most police departments classified high-tech losses with other burglaries and robberies, making it impossible to track the frequency of chip crimes. Yet anecdotal reports show the crime is a constant, and spreading, problem.

The list of companies hit by robberies and thefts reads like a roster of Silicon Valley. Sun Microsystems Inc. has been hit twice. Intel Corp., Silicon Graphics Inc. and Acer America Corp. also have been targeted, along with scores of smaller firms.

And like the technology that originated here, thefts and robberies are radiating outward like ripples in a pond to high-tech enclaves in Southern California, Oregon, Arizona, Texas, the East Coast, Asia and Europe.

Irvine, Portland and Dallas consider themselves the Silicon Beach, the Silicon Forest and the Silicon Prairie, respectively. In the past three years, each area has been stung by multimillion-dollar chip heists. But none has seen anything like the crime wave that hit Silicon Valley in the first half of last year, when there were an average of two chip robberies a week.

The chip industry recently has suffered a downturn that may make the goods less attractive to bandits. But there's little doubt thieves will return, given the field's history of sudden booms.

Silicon Valley's problem started quietly in the late 1970s. In those days, most chip thieves stole from the companies they worked for.

The situation has evolved via a form of brinkmanship, in which companies and robbers continually adapt and develop new ways to outdo each other.

Larger firms such as Intel and Sun Microsystems can spend more: hiring retired police officers and FBI agents, screening employees and installing sophisticated security programs. That has prompted some robbers to concentrate on smaller firms, such as assembly houses and chip brokers, or to target delivery drivers or to move to other areas, such as Southern California, where security is not as high.

As thieves started using tactics unheard of a decade ago, workers at firms ranging from Advanced Micro Devices Inc. to the neighborhood assembly shop have grown increasingly scared. Many declined to speak with reporters or did so only if their names were withheld.

Police said many companies are still in a state of denial and act only after they have been hit, sometimes more than once.

That presents a problem for some workers: The frustration that their companies aren't doing enough to protect them. Insurance company officials warn that it's a matter of time before a lawsuit claims that a company should have taken more steps to secure the workplace from robbers.

Said Jim McMahon, a former San Jose police detective specializing in high-tech crime: ``I know people who are scared to come to work. I have people who left the high-tech industry because they didn't feel safe.''

Piiceon's executives are among the few willing to talk publicly about the problem. Fonda said he believes that hiding from thieves only increases vulnerability.

Piiceon is also among the companies struggling to safeguard its employees. Fonda said his company has tightened security to the point where ``we have lines of prevention that I don't even know about because I don't want to be able to say anything if I'm a hostage.''

LOOSE CHIPS ASSEMBLY SHOP

Assembly shops take chips and plug them into circuit boards, which are shipped to computer makers. These businesses are far smaller than the expensive chip factories.

CHIP

Generic term for a thumbnail-size sliver of silicon that has been chemically processed to contain patterns of electronic circuitry. Each chip is packaged in plastic or ceramic casing with metal pins protruding from the bottom. The chips are plugged into plastic circuit boards and are used as building blocks of electronic systems from computers to garage door openers.

DYNAMIC RANDOM ACCESS MEMORY 

The primary chip used to store data and programs in a personal computer. DRAM chips, which are plugged into SIMM modules, range in price from $5 for a four-megabit chip to $35 for a 64-megabit chip. Prices in the past six months have dropped dramatically, causing less demand for DRAMs on the black market.

FLASH MEMORY

A flavor of memory chip that stores data even when the power is turned off. These chips are used in camcorders, digital cameras and personal computers. Some $15 flash chips can be found on the black market for $88. Flash chips are in short supply, and prices are high, making them attractive targets for thieves.

MICROPROCESSOR

The brain of an IBM-compatible personal computer. Pentium microprocessors made by Intel Corp. are the most popular kind. Wholesale prices range from $106 for a 75-megahertz Pentium to $1,500 for the newest generation chip, the Pentium Pro. Intel began putting serial marks on Pentium chips in 1994 to combat chip theft. If a microprocessor were a piece of real estate, its value would be $1 billion per acre.

SIMM MODULE

An acronym for a single in-line memory module, a SIMM is a small circuit board easily snapped into a slot on the main circuit board, or motherboard, of a personal computer. The module, loaded with DRAM chips, can be plugged into different kinds of computers and therefore is a hot commodity on the black market. A four-megabyte SIMM module retails for about $90.

WAFER

A circular disk of silicon processed in a chip factory and then sliced into dozens of individual chips. The thieves usually have no use for wafers.

WAFER FABRICATION PLANT

A chip factory builds layers of materials atop a purified silicon disk. The layers form patterns of electronic circuits that serve as the guts and brains of electronic goods. A chip factory can cost $1 billion but can generate enough revenue to recover the investment in three years.

SOURCE: Knight-Ridder Tribune News Wire

CAPTION(S):

2 Photo, Box

Box: LOOSE CHIPS (See text)

Photo: (1--Color) Art Fo nda, left, and Jeff Anhorn of Piiceon Inc. wear necklaces that can be used to contact police.

(2--Color) Richard Bernes of the FBI displays a pizza box he uses when speaking to firms about security.

Knight-Ridder Tribune Photo Service