In 1947, John Bardeen, Walter Brattain and William Shockley, working at Bell Telephone Laboratories, were trying to understand the nature of the electrons at the interface between a metal and a semiconductor. They realized that by making two point contacts very close to one another, they could make a three terminal device - the first "point contact" transistor.
They quickly made a few of these transistors and connected them with some other components to make an audio amplifier. This audio amplifier was shown to chief executives at Bell Telephone Company, who were very impressed that it didn't need time to "warm up" (like the heaters in vacuum tube circuits). They immediately realized the power of this new technology.
This invention was the spark that ignited a huge research effort in solid state electronics. Bardeen and Brattain received the Nobel Prize in Physics, 1956, together with William Shockley, "for their researches on semiconductors and their discovery of the transistor effect." Shockley had developed a so-called junction transistor, which was built on thin slices of different types of semiconductor material pressed together. The junction transistor was easier to understand theoretically, and could be manufactured more reliably.