Silicon Valley and tech industries

By Sofia Arts Romero and Manon Goirand

It is most likely that you have previously heard of the infamous Silicon Valley site at some point in your life. But, what makes it so special? Keep reading to understand a bit of history about this famous place!

Silicon valley takes its name from the concentration of multiple high-tech businesses, and now start-ups, located in the San Francisco Bay area. Indeed, given its concentration of high-tech companies and knowledge, this area includes the headquarters of the big giants of the internet: Amazon, Apple, Facebook, Google, and Microsoft. A fun fact about its name is that the term ‘silicon’ was solely associated with technology after a magazine publisher wrote about semiconductors, which is used in the manufacturing of computer chips, and how most headquarters of big companies producing them, such as Intel, were located in the now known Silicon Valley (NVM, 2017). After this publisment, the two terms became inseparable, and has acquired a prestigious worldwide name.

But how did it grow to become the most recognized and important IT cluster? In the 1940s, the Stanford engineering school was established, and it became a tradition where Stanford faculty would create their own businesses in the technology field based in the same area. Some examples of well known companies that were born from Stanford Faculty in the 1940s and 1950s were Hewlett Packard (HP) and Varian Associates. Additionally, the transistor and Silicon chips - hint to its name - were invented and manufactured in Silicon Valley, and in 1958 the U.S. government founded NASA, which was established in San Jose, where the only company able to build electronics for the space capsule was Fairchild Semiconductor (Batsell et al., 2017), also in the same area. Due to the recognition of great innovations in this area, and the aspiration to ‘create and innovate’ rather than chase money, the government decided to support through funding back in the 1960s, making it the catalyst for this high-technology focal point. Since then, Silicon Valley has substantially grown into a hub of innovation, where people from all around the world go to work in the high-tech field. We can also attribute its growth to the proximity of the prestigious universities of Stanford and the University of California, Berkeley. The universities only pushed further the growth of innovations as it provided the businesses with not only pioneering research but also with a highly skilled workforce of scientists, engineers, technicians and managers (Verbeke, 2009).

This knowledge cluster is prone to startups more than ever as Silicon Valley can be considered a localization economy, meaning there is a large number of firms in the same industry and in the same location. This benefits new businesses as there are knowledge spillovers between the firms, access to specialized labor (input sharing) and of course the competitive pressure between them leads to more innovation and productivity.

One of the downsides of Silicon Valley is the exclusiveness of the area which makes living expenses go through the roof. In fact, the area of San Jose - Sunnyvale - Santa Clara is the most expensive metro-area in the United States, where the average cost of a typical home is about $1 million. To make matters worse, a quarter of the households in the area earn about $200,000 per year, and may still struggle to find a suitable home and pay rent, whereas the same amount of earnings in another state or city may take them very far. Crazy, right?

Moreover, in the midst of coronavirus, Silicon Valley noticed how investors slowed down their finances, and many promising startups became concerned about dried up demand and unemployment, like in any other area of the world impacted by Covid (Moses, 2020). However, Silicon Valley was standing strong during the pandemic in relation to other industries in the same state (Swartz, 2020). This is because, given the cluster of tech industries, most jobs could be performed remotely, giving them a huge advantage compared to other non-tech companies. Overall, it can’t be said that Silicon Valley was hugely impacted by Covid-19. In fact, Silicon Valley has yet a lot to grow and innovate, which will hopefully keep surprising us in the future!

References:

Books:

Verbeke, A. 2009. International Business Strategy. Cambridge: Cambridge University Press.

Websites:

Why is Silicon Valley called Silicon Valley? (2017, November 10). Retrieved September 06, 2020, from https://pellcenter.org/why-is-silicon-valley-called-silicon-valley/

Batsell, J., Cornell, C., Graybeal, G., Green, M., Poepsel, M., Pucci, J., . . . Cuillier, C. (2017, August 23). From the Field: A Short History of Silicon Valley. Retrieved September 06, 2020, from https://press.rebus.community/media-innovation-and-entrepreneurship/chapter/from-the-field-a-short-history-of-silicon-valley/

Swartz, J. (2020, June 27). Silicon Valley economy remains strong 100 days into coronavirus, compared to other industries. Retrieved September 06, 2020, from https://www.marketwatch.com/story/silicon-valley-economy-remains-strong-100-days-into-coronavirus-compared-to-other-industries-2020-06-26

Moses, L. (2020, April 13). How the coronavirus pandemic is impacting buzzy startups, from Peloton to ThirdLove. Retrieved September 06, 2020, from https://www.businessinsider.nl/how-the-coronavirus-pandemic-is-impacting-silicon-valley-startups-2020-3?international=true