Silicon ValleyAmerica’s Pathbreaking Cluster Economy
Russell HancockPresident & Chief Executive Officer
Joint Venture Silicon Valley
10 October 2011
What is
Silicon Valley?
Some things Silicon
Valley is NOT:
•NOT a place you can point to on a
map
•NOT a place with a defined identity
•NOT a planned phenomenon
•NOT characterized by silicon or
semiconductors
So, what is
Silicon Valley?
1,500 square miles
35 Cities, 4 counties
2.4 million people, 41 percent foreign born
1.2 million workers
81 percent high school diploma; 40 percent college degree
25 percent of workforce in high-skill occupations
Income average 60 percent higher than US
6 percent US GNP, 11 percent of US patents
Productivity rate growing 50% higher than US average
What is Silicon
Valley?
So what is Silicon Valley?
A remarkably
enduring hotbed of
innovation and
entrepreneurship
Our most important characteristic:
We keep re-inventing ourself
Silicon Valley’s Waves of Innovation
RANK CITY REGISTERED PATENTS
1 SAN JOSE 1,960
2 Austin 1,221
3 Boise 1,028
4 San Diego 900
5 SUNNYVALE 842
6 PALO ALTO 766
7 FREMONT 698
8 Houston 661
9 CUPERTINO 633
10 MOUNTAIN VIEW 522
America’s Top Patent Generating Cities
Source: Silicon Valley Index, 2010
Milestone Silicon Valley Innovations
1940s Vacuum Tube
1950s Transistors
1960s Semiconductors, Defense Technology
1970s Integrated Circuit, Graphical User Interface
1980s Personal Computers, Workstations, Relational Databases, Biotechnology
1990s Network Computing, Packet switching, Internet Search
2000s Social media, Web 2.0
However, the Valley’s edge doesn’t stem from innovation alone …
1950sDefense Electronics
Hewlett-Packard, Varian
1960sSemiconductors
National Semiconductor, Fairchild, Intel,
AMD
1970sBiotechnology
Genentech, Genencor
1980sPersonal Computers, Workstations
Apple, Silicon Graphics, Sun
1990s
Network Computing, Packet Switching
Cisco Systems, Sun
Internet
Netscape, Yahoo, eBay, Google
2000sSocial Media
Facebook, YouTube
… but also from entrepreneurship
Internet-based commerce (Netscape)
Free search, supported by advertising
(Google, Yahoo)
Music downloads (Apple itunes)
Social networking (Facebook,
MySpace)
Consumer as producer (You Tube)
The Valley also generates
new business models
1982 20021. Hewlett-Packard 1. Hewlett-Packard
2. National Semiconductor 2. Intel
3. Intel 3. Cisco*
4. Memorex 4. Sun*
5. Varian 5. Solectron
6. Environtech* 6. Oracle
7. Ampex 7. Agilent*
8. Raychem* 8. Applied Materials
9. Amdahl* 9. Apple
10. Tymshare* 10. Seagate Technology
11. Palm,* Google,* Cadence,*
Adobe,* Yahoo*
Largest Silicon Valley Employers
*no longer existed in 2002 *didn’t exist in 1982
Source: Stanford Project on Regions of Innovation & Entrepreneurship
1982 20021. General Motors 1. General Motors
2. Ford 2. Ford
3. Chrysler 3. Daimler-Chrysler
Largest Detroit Employers
Source: I made it up!
But the other story is Silicon Valley’s small companies
Source: Joint Venture: Silicon Valley Network, Silicon Valley Index (2005)
Technology Regions Will Always Experience “Boom-Bust” Cycle
• New technologies drive dynamic waves
• Entrepreneurs take advantage of new opportunities
• Swarms of new firms cluster around new technologies creating
short term bubbles
• New products eventually become commodities, bubbles
burst.
• New technologies emerge
from the convergence of old
technologies and the process
of “creative destruction”
begins again
“SILICON VALLEY LOSING ITS EDGE.”Cover Story, Business Week.
“DREAMS OF STRIKING IT RICH FADING IN SILICON VALLEY.” Front page, Los Angeles Times
“SILICON VALLEY WILL NO LONGER BE AN ICON.” Po Bronson, Wired
“SILICON VALLEY LOSING ITS EDGE.”
Cover Story, Business Week, 1985.
“DREAMS OF STRIKING IT RICH FADING IN SILICON VALLEY.”
Los Angeles Times, 1991.
“SILICON VALLEY WILL NO LONGER BE AN ICON.”
Po Bronson, 2003.
• Between 1846 and 1852 telegraph
miles in the US rose from 2,000 to
23,000. Three lines covered New York
and Boston, though there wasn’t
enough traffic for one.
• In 1894 the US had 192 railroads in
bankruptcy (41,000 miles of track)
Bubbles aren’t new
• Between 1846 and 1852 telegraph
miles in the US rose from 2,000 to
23,000. Three lines covered New York
and Boston, though there wasn’t
enough traffic for one. But the spread
of cheap telegraphy fostered other
key innovations: Associated Press,
national markets in stocks.
• In 1894 the US had 192 railroads in
bankruptcy (41,000 miles of track). But
railroads served as crucial platform
for new industries: Sears & Roeback
Bubbles aren’t all bad
• Prices plunged: servers, digital
cameras, domain-name registration,
web design, web hosting, office space
• System in place for transmitting data,
voice, documents; companies like
Vonage and Skype move up.
• Google prospered by lashing together
thousands of cheap servers and tapping
into an installed base of 172 million web
surfers, and hiring redundant engineers
After the dot-com bubble:
So what’s the secret?
A Habitat for Innovation
Results-oriented meritocracy.
Climate that rewards risks, tolerates failure
Strong markets (capital, labor)
Mobile, fluid workforce
Favorable government policies
University-industry collaboration
Specialized infrastructure (venture funding,
lawyers, executive search, accountancies)
Quality of life
Cluster effect
INDUSTRY CLUSTERS:geographic concentrations of related industries
Exporting Companies
Specialized Suppliers
Supporting Infrastructure
AMD
INTEL
CYPRESS
chemicals, equipment,
software tools, clean room
design, toxics monitoring
research, workforce training, building
inspectors, electricity, airports, executive
search, accountancies, law firms
An example of the cluster effect:
SEMICONDUCTORS
CLASSIC EXAMPLE OF CLUSTER EFFECT:Kleiner Perkins Network, ca. 1998
Thin line: partnership between two KP companies
Dotted: exec from one KP company on the board of another
Thick: KP partner sits on board of more than one company
Maximizing the
Semiconductor
Food Chain
Silicon Valley
Taiwan
China
Three Regional Centers growing together, increasing
the overall size of the pie
Value-added IC design
Productization
Advanced IC manufacturing
Regional Distribution
Low Cost Manufacturing
Systems and Chip Architecture
Global Marketing
Capital Investment
Cluster effect transcends national boundaries
EXAMPLE:
Applied Materials, Inc.
So what’s
happening
right now in
Silicon
Valley?
We are building
new clusters in
renewable
energy
and clean
technology
VC investment in clean
technology nearly doubled …
Venture Capital Invested in Clean TechMillions of Dollars, Silicon Valley Region
Jobs in the ‘Green’ EconomySilicon Valley
Cleantech jobs are growing …
Green Business EstablishmentsSilicon Valley
The number of cleantech
establishments is growing …
Green Jobs by SegmentSilicon Valley
The mix is diverse …
VC Investment in Clean TechnologySilicon Valley
and so is the
investment mix …
Green Technology Patent RegistrationsSilicon Valley as a percentage of the United States
Silicon Valley holds the
lead in green patents …
Silicon Valley leads in the
production and use of
renewable energy …
Solar InstallationsCapacity (kw) added through the CA Solar Initiative Silicon Valley
Alternative Fuel Vehicles as a Percentage of
Newly (New & Used) Registered VehiclesSilicon Valley and the Rest of California
We lead in the use of alternative-
fuel vehicles …
However …
Silicon
Valley has
significant
challenges
to address.
Our Litany of Troubles:
Transportation
Affordable Housing
Infrastructure
Quality of Life
Health care, health insurance
Education
Workforce development
Environment
Dysfunction in Sacramento
Even more importantly, we
have some very serious
non-local issues:
Cleantech is not like IT
Federal Funding: we’re losing
Talent drain
Dysfunction in government
Yet Silicon Valley has no overarching framework for regional decision making.
Joint Venture:
Silicon Valley
Network was
established to fill
this void.
The Joint Venture Framework
“Joint Venture is like the United Nations of Silicon Valley.”
Rob Kwasnik, Intel
Labor
Academia
Business
Community
Organizations
Government
The mission of Joint Venture is to:
1.Convene the region’s leaders, across
every major sector.
1.Provide data and analysis.
1.Launch initiatives that deliver
measurable results.
We are applying
the model to the
emergence of the
clean-tech sector
We issued a
“greenprint”
outlining our
strategy
Joint
Venture’s
Initiative
Structure
CHAIRS
Co-Chair: Chuck Reed, Mayor, San Jose
Co-Chair: Chris DiGiorgio, Accenture
CLIMATE PROSPERITY COUNCIL
COUNCIL MEMBERSBetter Place Electric Storage Institute
Cypress Semiconductor Applied Materials
UC Santa Cruz Akeena Solar
Optony McCalmont Engineers
NASA/Ames PG&E
Silicon Valley Leadership Group McKinsey & Company
City Managers (Dave Knapp) Sun Power
Google Wilson Sonsini
PG&E Adura Technologies
STAFFKelly Krpata, Applied Materials Director of Climate Prosperity
Rachel Massaro, Associate Director
Work Plan:
Power purchasing agreements
Smart Grid
Permitting
Electrical Vehicle Infrastructure
Federal Funding
San Jose Mayor touting the greenprint
Ribbon cutting at a solar installation
Thank you for the honor
of your invitation.
Russell Hancock
President & Chief Executive Officer
Joint Venture: Silicon Valley Network
100 West San Fernando Street, Suite 310
San Jose, California 95113
(408) 298-9330
www.jointventure.org