FIRST AND SECOND PART OF THIS SERIES PETER HAYES LOOKED
BACK AT THE FOUNDING OF SANTA CLARA (SILICON) VALLEY AND
THE COMPUTER GIANTS THAT EMERGED. TODAY, IN THE FINAL
CHAPTER, HE LOOKS AT THE FUTURE OF THE VALLEY AS NEW
COMPETITORS APPEAR ON THE HORIZON AND THE PRICE OF CHIPS
transforming itself from fertile farmland into an high
technology oasis, Santa Clara Valley - since the early
70's better known as Silicon Valley - has become the most
important single technology location in the world.
The main reason
being that, for most of its short history,
computer/technology companies needed to either cluster
around Intel (and its clones), or else work in
partnership with the companies that were already
established below the Santa Cruz mountains.
The California climate and lifestyle probably also played
a role in their choice of location.
However, of late, there has been an Autumn wind blowing
through the Valley. While many writers might put this
down to an economic slowdown in Asia or problems in the
former Soviet Union, the problem runs deeper than that.
To date the riches of Silicon Valley has come from ideas,
design and management. It is also enjoyed a reputation as
a place where ideas get from drawing board to
ready-to-market quicker than elsewhere. However, from the
introduction of silicon chip (in 1972) very few computers
(or computer-based technologies) have actually been
manufactured in the region - Apple being a rare
Naturally part of the recent slowdown has been caused by
poorly designed software. Much of it from the Valley
itself. The Year 2000 bug was down to programmers not
believing that their products would not be used by the
year 2000 or else using programming languages (or macros)
that themselves contained the bug.
Corporate computer budgets that would have been better
spent on new equipment has been side tracked into
tackling the Y2 problem. Thankfully this is a
Harsh as it might seem, some of the problems of the
modern computer industry have been partly to the
customers' benefit. Competition has driven prices down
and desktop computers are cheaper than ever. World wide
today's biggest selling sector is the "sub-$1,000
This development has resulted in the closure of several
chip making plants - including two in the UK.
The arrival of the affordable desktop PC changed the face
of the world. The demand for computers exploded in a way
that we will never see again. Many companies proved,
sadly, that they hadn't anything to offer when this boom
Good times or bad, the giants of Silicon Valley such as
Microsoft, Hewlett-Packard and Intel have dug themselves
so deeply into the world economy that they are almost
fireproof. Their bottom line may have suffered of late
(like most of the computer industry), but any subsequent
pick-up can only be to their benefit.
However it would take a brave man to predict a new name
that could ever, in the near future, be put beside these
three - Internet search engineer companies excepted.
One of the great ironies of the Valley is that certain
companies, such as Intel cannot find the correct
development staff. Many promising engineers have been
siphoned off to the fast growing Internet and
telecommunications industries. Statistics published by
the US government state that the country has 400,000
vacant computer positions.
(After a visit to the Valley in September 1998 Bill
Clinton promised to ask Congress to increase the number
of technology-related guest workers allowed in to the
United States under the so-called H1-B visa.)
The above problems are being further compounded by a
lessening of the need to be near "the heartbeat of
technology." The vast majority of new products don't
need to be near the cutting edge of technology, and many
areas of specialist high-tech expertise are outside the
Valley - the satellite build-and-launch industry for
One of surprising developments of recent years is how the
third-world has taken to computers. In places such as
India and Malaysia small pockets of firms are producing
software or small scale hardware at competitive prices.
The reasons being simple economics: Programmers and
engineers can be found for a third of the price of those
in the West.
The biggest thing in computing at the moment is the
Internet. However with Microsoft giving away a browser
and Netscape having to follow suit, the Internet is far
from Valley dependent. The major powers of the Internet
are major telephone companies - who own the vital
fibre-optic connections - and Internet Service Providers
In recent years the computer industry has tried to get
involved in products that have one foot in the home
entertainment field. Multimedia has only been a partial
success and interactive television hasn't yet been given
a fair trial.
Perhaps, in the future, the general electronic and
television people can make a more of a success out of
these sectors than the specialist computer firms?
Even Intel have unique challenges ahead. They trade on
being at the cutting edge of chip technology and can
price their goods appropriately. With the next ten years
the gap between themselves and their rivals might well
have all but dried up.
The industry is full of false profits forecasting the
death of the PC and new ways of interacting with
computers. However the pattern has been set, and while
new specification and power will be expected and
delivered, the home/small office PC is going to be around
for a long time yet.
The reason being that fulfils most peoples needs. Most
people buy a desktop computer to do four main things:
Word process, handle accounts (or similar), play games
and surf the Internet. Certain business user can have
very specialists needs, and therefore need specialist
equipment, but SV hasn't grown rich on niches.
The games computer market has been proved to be volatile
- if not outright boom-and-boost. Atari, Commodore and
Sinclair have all had periods of success but have never
sustained it. It will be interesting to see if Sony can
find a way of sustaining its present lead in this
Statistics suggest that the vast bulk of those investing
in the computer industry are investing in software and
Internet/communications. Small companies that appear to
have talent are often subject to vast stock price rises.
There are even large investment firms, such as CMG, that
specialise in buying and selling technology stock.
With every passing day Silicon Valley becomes less and
less relevant. Not because the demand for computers and
technology is on the decrease, quite the opposite, but
through modern communications networks the whole world
has become a form of giant Silicon Valley.
While most successful firms will probably stay in the
region, in the future far fewer start-ups will feel the
need to pack-their-waggons and head for the Californian
Peter Hayes (Trinity) (C)