How Silicon Valley took over the world
THE LARGEST CENTRE OF HIGH-TECH INDUSTRY ON THE PLANET LIVES IN THIS POCKET OF CALIFORNIA.
SILICON VALLEY IS a phrase that readily trips off the tongue. It’s also a cliché that the press seems compelled to work into just about any story relating to certain high-profile computer companies. Like so many well-known phrases, though, it’s a term which, to most of us, means very little. Here, we examine how this land of technological wizardry came into being and how it grew to support thousands of high-tech companies with a combined value measured in trillions of dollars.
Geographically, the region itself is not particularly well-defined. Silicon Valley runs from the southern edge of San Francisco for 80 kilometres along the Santa Clara Valley to San Jose in the southeast. Residents of San Francisco are adamant their city is not part of Silicon Valley, although that’s a moot point; with the region’s expansion north, that could change in the years to come.
The word ‘silicon’ stems from the time that the area was home to several large semiconductor manufacturers such as Intel and AMD. However, with software and internet companies now every bit as important to the region, it’s clear that what really sets this area apart is technological innovation and entrepreneurship. Industry commentators have identified that sense of technical innovation dating back to well before most people had ever heard of digital electronics, let alone computers.
The first ever ship-to-shore message to be received in the US by radio was from the San Francisco lightship announcing the return of the American fleet from the Philippines after the Spanish-American War of 1898. A decade later, America’s first radio station to broadcast a regular schedule of programmes was KCBS in San Jose, which started its transmissions in 1909. In an era when radio communication had previously been via Morse code, this enterprise involved a high degree of inventiveness.
At around the same time, the Federal Telegraph Company was founded in Palo Alto, California. Boasting Lee de Forest — the inventor of the valve and arguably the father of electronics — as one of its employees, the company was influential in developing broadcast technology.
Entrepreneurship in the region can also be traced back to the very early days to a time when electronic computers were little more
than theoretical concepts exercising the minds of academics like Alan Turing. A plaque outside a garage in Palo Alto claims to be the birthplace of Silicon Valley, this being the place where, in 1938, Stanford University graduates William Hewlett and David Packard started to develop their first product. That initial device, a piece of electronic test equipment called an audio oscillator, had nothing to do with digital electronics, using valves instead of transistors, but their company, Hewlett Packard, would grow to become today’s fifth largest IT company.
Almost 20 years would pass from that garage in Palo Alto and a development that would change Silicon Valley forever, and in so doing make that phrase a lot catchier than Valve Valley ever would have been. That innovation was the invention of the transistor, which would soon replace the valve as the cornerstone of electronics, paving the way towards increased circuit complexity, plummeting prices and muchimproved reliability.
This development didn’t happen in California, though, but at AT&T’s Bell Labs in New Jersey, and what’s more, that first transistor was made out of the element germanium. This all changed when co-inventor, physicist William Shockley, moved to Mountain View, California. Here, in 1956, he set up the Shockley Semiconductor Laboratory, where he developed the superior silicon transistor. His company wasn’t a commercial success, and just a year later, eight employees left to form Fairchild Semiconductor.
Fairchild might no longer be a household name but the impact it had in those early days — which continues to the present day — was profound. The invention of the transistor led to the development of the integrated circuit, or IC, which was basically a working circuit made out of multiple transistors on a single piece of semiconductor material. Fairchild’s Robert Noyce would later produce the first ever IC to be made from silicon. Then, in 1968, together with colleague Gordon Moore, Noyce left Fairchild to set up Intel Corporation, also based in Mountain View.
Since the company is best known for its microprocessors, it might come as a surprise to learn that Intel’s first products were memory chips: microprocessors had yet to make their first appearance. These memory chips were certainly used in computers and were much cheaper than the magnetic core memories that preceded them, but those computers were mainly built out of individual transistors, wired together in their thousands. No wonder a cheap mini-computer of that era would set you back over US$130,000 in today’s terms. But the most important change yet, a change that would revolutionise computing, was about to take place, and it would happen at Intel.
THE DREAM IS STILL ALIVE AND, IF ANYTHING, THE REGION’S SUPREMACY IS ONLY GROWING.
Just three years on from the company’s inception, Intel ran an advertisement announcing “a new era in integrated electronics”. The advertisement was for the 4004, the world’s first microprocessor. That pioneering device was a 4-bit processor (today’s chips have a 64-bit architecture); it ran at 740 kilohertz, a far cry from today’s 1–3 gigahertz; and it had 2,300 transistors compared to several billion in today’s chips. Despite all that, the saying that “mighty oaks from little acorns grow” has never been more appropriate.
So by the early ‘70s, Silicon Valley was developing silicon chips, and those chips were starting to find their way into computers. Needless to say, Intel would soon be joined by a whole raft of other semiconductor manufacturers. Some, like AMD, are still well-known today, while some, like Zylog, are now producing more niche products. Others, such as MOS Technology, while hugely influential at the time, are now consigned to history. Changes were afoot in many places.
When Intel and its competitors first started producing silicon chips, the devices were used in hugely expensive computers like the mainframes that served whole companies and in the mini-computers that would be operated by single departments. Most of the key players in these markets were not located in Silicon Valley but on the east coast or the Midwest. Mainframe giant IBM was based in New York State, while mini-computer pioneer Digital Equipment Corporation (DEC) was to be found in Maynard, Massachusetts. As these giants continued to grow, a game-changer emerged on the scene.
While it never went on to become a commercial success, the Altair 8800 was genuinely groundbreaking in being the first machine to be recognised as a true personal computer. This Intel 8080-based machine cost US$395, which was a lot of money when it launched in 1975, and it came in kit form that enthusiasts had to solder together themselves. Its manufacturer, MITS, wasn’t based in California but in Albuquerque, New Mexico, but where MITS led others soon followed.
Without a doubt, the single most influential company to enter the micro-computer market of the mid ‘70s was Apple. Famously founded by Steve Jobs and Steve Wozniak in a garage in Los Altos — seemingly something of a tradition in the early days of Silicon Valley — the company’s first product was the Apple I personal computer, in 1976.
Unlike the Altair 8800, the Apple I was fully assembled, but you only got the motherboard so you had to add your own keyboard, case and monitor. Only 200 were ever sold, but it paved the way to its successor, the truly innovative and hugely successful Apple II. Here was a computer that was fully assembled and housed with a keyboard — all you had to do was plug it into a TV to act as a monitor and an audio cassette player that provided storage. At US$1,298 for the 4k version, or US$2,638 (over US$11,000 in today’s terms) if you wanted 48k of memory, it seems incredible it sold in such quantities.
Fuelled to no small extent by the introduction of the VisiCalc spreadsheet, an ancestor of the Excel spreadsheet program, this moved the Apple II from being a hobby machine to a personal computer that could be used in business. From 1977 to 1980, Apple’s sales of this, its only product, went from US$775,000 to US$118 million. The rest, as they say, is history.
To see another vital aspect of Silicon Valley’s success, we need to wind the clock back to look at one more trend that was occurring in parallel with the growth of personal computing. In 1969, the US military’s ARPANET underwent its first trials. This was an early wide-area computer network, and in time, it would form the basis of the internet. That initial network comprised just four sites — one in Utah and three in California, including one at the Stanford Research Institute, which, at the time, was part of Silicon Valley’s Stanford University.
By the late ‘80s, moves were afoot to open up the internet to commercial use. The first service providers were not all concentrated in California but were scattered throughout the US. This perhaps wasn’t too surprising — breaking down geographic barriers has been a key feature of the internet. That isn’t to say that Silicon Valley hasn’t played a huge part
in the growth of internet-related tech, though — far from it.
Today, the phrase ‘search engine’ is virtually synonymous with Google, but it hasn’t always been this way. Founded in 1995, Alta Vista, based in Palo Alto, was one of the world’s most-used search engines. Contemporary Yahoo! — who eventually acquired Alta Vista by purchasing its parent company Overture in 2003 for US$1.63 billion — was another of the early greats in the world of search engines, also based in Silicon Valley.
Big names in Silicon Valley also include manufacturers of the hardware that chug away in the background making the internet tick. Many of the routers or access points that bring the internet into our homes are manufactured by Cisco, Netgear and Ubiquiti, all of which are based in the region. And when we turn our attention to Silicon Valley’s most recent success stories — the growth of social media and file sharing services — once again, we see the supremacy of this illustrious region, with Facebook, Twitter, WhatsApp, Google, YouTube and Instagram all founded and based either in the Valley or nearby San Francisco.
The near dominance of Silicon Valley in the world of social networking suggests that the dream is still alive and, if anything, the region’s dominance is only growing. The story of Google — with its corporate fingers in pies as diverse as self-driving cars, search engines, cloud-based storage, mapping and navigation — rather suggests that Silicon Valley’s future is going to be even more varied than its past.
Predicting the future is always difficult, especially in the world of technology, so our suggestion of what Silicon Valley’s future holds is made with some trepidation. However, we can’t help but notice that Google has recently set up a company called Waymo to further develop its driverless cars, while electric car manufacturer Tesla is based in Palo Alto. With cars migrating from petrol engines and mechanical engineering to electric engines and software, could Silicon Valley become the new Detroit?