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