Silicon Valley: The true tech mecca?

Every so often, I wonder if Silicon Valley is all it's cracked up to be. Sure, the confluence of venture capital, universities, and lawyers make it a veritable petri dish for the formation of technology companies, but there are a lot of other great places for innovation, right?

Well, if you go strictly by market capitalization, and look at the top 10 information technology companies, 6 of them are based in Silicon Valley: Cisco Systems, Google, Intel, Hewlett-Packard, Apple, and Oracle. In fact, if you map these company's headquarters, they'd all be inside a circle with a radius of just 10 miles. Amazing, when you think about it.

And these companies are far from just "headquartered" in Silicon Valley.

Google and Apple are very much centralized from a product and technology development standpoint.

Intel has research-and-development facilities in Oregon, Arizona, and Israel, but a significant amount of its R&D occurs at or near its Santa Clara, Calif., headquarters. The same is true of Cisco, though the networking giant owns several large subsidiaries--such as Scientific Atlanta--that are based elsewhere. Likewise for Oracle.

HP is somewhat more diversified, with product development for its Compaq unit in Houston, plus R&D facilities in Idaho, Oregon, and additional cities around the globe. But still, more of its R&D occurs in northern California than anywhere else.

Three of the four companies not based in Silicon Valley have research and development consolidated near their corporate headquarters: Microsoft in Redmond, Wash.; Qualcomm in San Diego; and Nokia in Finland.

IBM, on the other hand, is the most distributed company of the 10, with R&D facilities in New York, Massachusetts, Vermont, North Carolina, Texas, Minnesota, and a number of international locations, including London.

What does all this mean? Well, the data's essentially useless, unless you compare these companies to the same group, say 5 or 10 years ago. Luckily, I've got a good memory. It's not necessarily obvious from the data, but there does appear to be a trend toward more distributed R&D among large companies--if not domestically, then certainly internationally.

Although there are a number of new and growing U.S. technology hubs, none appears to be in a position to unseat Silicon Valley as the tech mecca.

Internationally speaking, China, India, Israel, Japan, and the United Kingdom each have technology development centers with tremendous growth potential. South Korea and Taiwan are nothing to sneeze at, either. Sure, they all have a way to go to match the confluence of resources and talent that Northern California offers. But the trend is there.

And while our qualitative analysis consists only of 10 companies, I do believe that it represents the industry as a whole.

In summary, as information technology penetrates further into the lives of more and more people, it stands to reason that innovation hubs will become more and more geographically distributed, if not also technically specialized.

And someday, a new technology may take root and ultimately supplant electronics as the driver of human innovation. It might be a form of biotechnology, nanotechnology, or something else entirely. In that case, all bets are off.

Updated 5/29/08 12:23 PM - Modification to paragraph on Intel R&D.

[Tony McCune]

The only flaw I see in this logic is that all the examples are fortune 500 technology companies. Tech is something more like the middle class I think. The silent majority of technology companies are small to medium businesses scattered all over. In fact, you can even find cutting edge Web properties in the mountains of North Carolina http://www.digitalchalk.com

[The_Decider]

The writer is a pro-corporate, pro-status quo marketer. That is why his posts are so shortsighted.

[The_Decider]

True innovation is not being done by these huge corporations. The are done by medium to small business scattered everywhere. Some of the most cutting edge stuff is done in surprising places, i.e not in California.

[CompEng]

"Intel has research-and-development facilities in Oregon, Arizona, and Israel, but the majority of its R&D occurs at or near its Santa Clara, Calif., headquarters."

This is quite simply untrue. Core 2: Israel. Nehalem: Oregon. Atom: Austin, Texas. Santa Clara is far from the top of the heap in Intel R&D, and has been since the Pentium Pro.

[tzlfpmnf]

Every so often someone comments on Silicon Valley and tries to explain why it is the tech mecca that it is, and if you really want more facts on it, check out the AEA's report they do every year that breaks down technology/electronics industries and employment by state. The Bay Area has the schools: Berkeley, Stanford, and many others. It has a slew of VC firms, take a stroll on Sandhill Rd., and of course the largest tech companies anywhere, such as AMD, Applied Materials, Yahoo, and the list could go on. The only other area that comes close is around Boston, for a lot of the same reasons. This won't change for a while, so get over it.

[The_Decider]

But innovation is not driven by these huge companies. The silicon valley isn't nearly as relevant to the tech world as it was 10+ years ago.

[Tony McCune]

This point of view is a great illustration of the arrogance in Silicon Valley. Assuming two good schools and a gaggle of VC define a tech mecca shows how inbred and self absorbed some of these echo chamber members can get.

[atish505]

Unless other regions come up with a Google, NVidia, Facebook, Netapp and other great Silicon Valley companies that have succeeded in last 10 years they are second fiddle and playing catchup.

Silicon valley gets 25% off all Venture capital invested in North America, accounts for more than 1 in 3 tech IPOs for last 10 years.

Another part of the world that is coming up fast and where many Silicon Valley companies have and are setting up large operations is Hyderabad, India.

Google, Nvidia, NetApp, Oracle, Microsoft are already there and so are 100s of other startups.

[johnvianney]

I agree that Silicon Valley is the true tech mecca, however, I would to make one comment regarding Intel. Intel does significant majority of their design work in Santa Clara; R&D is done primarily in Hillsboro, OR. Your comment that "Intel does a majority of R&D in Santa Clara..." is simply not correct. There is a distinction between creating new designs and doing research & development.

[The_Decider]

How is it a "mecca"? It is not like anyone outside the SV is influenced in anyway.

[stobak]

Thanks for the comments about Intel R&D. I stand corrected.

Steve Tobak

[tzlfpmnf]

So what is the cutting edge stuff that's being done elsewhere, and when will the large companies buy them so they won't have to innovate. I don't doubt it, just haven't heard much about it.