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Tech Connect | Cracking the Silicon Valley Code (Part I)

(File Photo) San Francisco residents work out near the Golden Gate Bridge on April 27, 2020. (CNS/ Liu Guanguan)

By Philip Leung

This is a story of two lands. One, a world leader in technology. The other, a rising city cluster. The world leader is intent on staying at the helm. The rising cluster aspires to close the gap.

The leader is Silicon Valley, also known as the San Francisco Bay Area. The rising cluster is the Guangdong-Hong Kong-Macao Greater Bay Area (GBA).

Having lived and worked in these two lands for over 40 years, I observed many common threads between the two. Silicon Valley's initial rise, rapid growth, sustained development as well as global prominence can therefore provide lessons for the GBA in its upward trajectory. Conversely, the Valley's travail can also show pitfalls for the GBA to avoid.

Sunny Valley by the Bay

In the 1970s, I moved from Boston to a city called Sunnyvale, in the heart of what is now Silicon Valley. I started working in a semiconductor company called Siliconix. The company is located amidst orchards and canneries. In fact, the myriad orchards, with acres filled with ripening fruit, had inspired a nickname "Valley of the Heart's Delight" since the early 1900s. The orchards have largely disappeared now from Sunnyvale and the neighboring cities. High-tech corporate headquarters sprouted where the orchards used to be.

The San Francisco Bay Area started growing rapidly almost since California attained statehood in 1850. A good living environment began attracting scientific researchers throughout the 20th century. Stanford University, founded in 1885, encouraged students to commercialize their innovative ideas, which led to the formation of iconic companies such as Hewlett Packard in 1939. In addition, steady US Department of Defense spending and an abundant supply of venture capital contributed to its robust growth. By the time I set foot there in the 1970s, this area was already producing world-class chips, software and digital technology. It was also pushing on to prominence in modern mobility, computer networking and space technology.

Less noticed but also important, the Valley had gradually become an important connector to the Asia Pacific. Working at chip manufacturer AMD in the 1980s, I was assigned to the task of developing the Asia-Pacific markets. Local companies called these markets "ROW" (rest of the world), a polite euphemism for a lowly geographic region which implied the lack of corporate attention.

Despite such humble beginnings, ROW revenues experienced explosive growth after the 1980s. Moreover, subsequent developments vindicated the importance of these markets, starting with Japan, followed by the so-called "Tiger" economies, and then Mainland China. Appropriately, ROW was gradually renamed Asia Pacific.

Meanwhile, the term "Silicon Valley", coined by journalist Don Hoefler in 1971, gained widespread use around the world.

My family settled in Cupertino, a stone's throw from what is now "Infinite Loop", where Apple's headquarters are located at the southern end of the Valley. When I left this area in the 1990s, almost half of Cupertino's population was of Asian ancestry. The 2010 census showed a figure of 63%, and the bulk was Chinese (28%) and Indians (23%). A popular local joke holds it that ICs form the cornerstones of the Valley; and ICs do not stand for Integrated Circuits in this context, but Indians and Chinese!

Another city called Fremont, located in the "East Bay", also attracts a large population of Chinese and Indians, both at 18% as of 2010. It used to be far from the center of the Silicon-Valley action, a bit like Zhuhai City has been within GBA until recently. However, in 1972, the Bay Area Rapid Transit System (BART) was opened, connecting Fremont with San Francisco and other cities. Fremont's economy grew rapidly since then. Employment at Tesla alone reached over 13,000 there by June 2020. Many other companies such as Seagate, Lam Research and Cirrus Logic have also built and expanded factories there.

There is a key object lesson there, a lesson epitomized in the GBA. Transport infrastructures such as the HZMB (Hong Kong-Zhuhai-Macao Bridge) or the XRL (Guangzhou–Shenzhen–Hong Kong Express Rail Link) play a critical role in regional economic development, personal well-being and wealth creation.

NASA Research Park, established as Ames Research Center in 1939 adjacent to the Naval Air Station Moffett Field, in the center of the region that would subsequently become known as Silicon Valley.

Common Threads

As the Silicon Valley ecosystem evolved in these last 50 years, several somewhat unique characteristics emerged.

First, critical mass. Serial acquirers abound, starting initially with companies such as Oracle, Cisco, HP, and Intel, followed later by companies such as Google, Apple and Facebook. These Silicon-Valley companies have healthy balance sheets, cutting-edge technologies and forward-looking strategies. They are capable of successfully consummating very large mergers and acquisitions.

Second, disruption. Valley companies vigorously develop disruptive technologies that change industries, or even create entire industry sectors. Apple and Google have disrupted the mobile communications industry, and Google and Facebook have disrupted the advertising industry. Apple rules the music industry. Tesla disrupted the auto industry. Netflix, Airbnb, Uber, Zoom and dozens of other companies have also created value and caused upheavals. In the process, these Valley companies have collectively created valuations of hundreds of billion dollars. Apple, for instance, boasts a market capitalization of over 2 Trillion at the end of 2020!

Third, diversity. Silicon Valley is global, large-scale, and unconventional. About 400,000 technology employees work in the 2,000 Valley tech companies. If the supporting infrastructure service providers are included, there may be one million troops. This labor force is global. Almost two-thirds of people working in Silicon Valley are "foreign workers." They have migrated from all over the world to Silicon Valley, bringing diverse experiences, and they also understand how industries in different countries operate.

About Diversity

Last year, before Covid became rampant, I was invited to a casual lunch after a meeting in the "Googleplex", the corporate headquarters of Google and its parent company Alphabet Inc. A huge choice of food would greet anyone walking into the massive Canteen. The diversity of Google employees are as impressive. Indians, Mexicans, Chinese, Japanese, Koreans, Malaysians, Filipinos and many others constitute what may look like a mini United Nations.

Googleplex is just a microcosm, a visible personification of Silicon Valley's culture if you will. Diverse, unconventional, somewhat rebellious, and even weird. That is part of the Valley's uniqueness, and probably even one of its key success factors. Ironically, even such cultural weirdness is attracting imitators around the world.

The reality is, Silicon Valley is easy to imitate in form, but hard to replicate in substance.

Regional Integration and Collaboration

One similarity between the GBA and Silicon Valley is that neither is dominated by a single axis city. This is very different from the Tokyo or New York Bay Areas. Silicon Valley consists of 101 cities in 9 counties, while the GBA consists of 9 cities and 2 SARs. As the Silicon Valley cities evolved, they started playing different roles. Palo Alto, Santa Clara, Mountain View, Cupertino, San Jose and other cities have spawned large technology companies such as HP, Intel, Google or Apple. San Francisco has attracted many small and medium-sized innovative companies, as well as finance and tourism. Oakland has become a major port, with numerous multinational companies as well as an emerging service center. And the North Bay around Napa is a major player in wine and agriculture.

Such division of roles has also occurred in the GBA. Guangzhou is the cultural, political and economic center of Southern China. Hong Kong is a global financial center, and a "super-connector" between the East and the West. Shenzhen is China's undisputed center of technology, innovation and entrepreneurship, with an outstanding private sector. Flanking Shenzhen are the manufacturing bases in neighboring Dongguan, Huizhou, Zhongshan and Jiangmen. Zhuhai is called the most livable city in China.

Silicon Valley provides world-class free flow of information and protection of intellectual property. In order for innovation and technology companies to succeed, they need full and unrestricted access to the global digital technology and knowledge networks. In addition, these companies also need to protect the propriety information they generate through their research and development. In other words, the intellectual property rights of enterprises must be vigorously protected. There are also other critical factors for success.

Cracking the Code of Success

So how did Silicon Valley evolve into the world's center of technology, innovation and entrepreneurship? I see five key factors contributing to the sustained development of Silicon Valley:

1. A corporate culture that encourages technological innovation and entrepreneurship

2. Inclusive and open minds which embrace creativity and differences

3. Strong interpersonal and information networks

4. An abundant supply of talents

5. A good living environment

In Part II of this article, I will examine the challenges facing Silicon Valley — such as cost, tax, regulations, as well as the hemorrhage of talents and businesses. These are challenges which the GBA will inevitably face, and learn from.

 

Philip Leung is a technology executive, with 40 years of experience in building businesses across geographic regions, particularly Silicon-Valley companies entering China and Chinese enterprises going global.

The views do not necessarily reflect those of DotDotNews.

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