Silicon Valley Will Never Die

The U.S. high-tech center Silicon Valley will continue to serve as a hub for innovative technology and entrepreneurs?

When the IT industry bubble burst three years ago, Silicon Valley turned into a ghost town, losing part of its glory as a high-tech center. However, as expectations forecast that the high-tech industry will serve as a growth engine for the future economy, just as it did in the 1990s, and with the climbing share prices of IT businesses, Silicon Valley is once again the focus of public attention.

Business Week, a weekly economic magazine, predicted a positive picture for Silicon Valley saying, “Silicon Valley will remain a Hollywood for high-tech industries,” in its recent edition.

Silicon Valley’s unemployment rate stands at a whopping 8.5 percent. The jobless rate in San Jose stood at 17.4 percent from December 2000 through April 2003, which is the most significant decline in job losses in one area since the Great Depression. The vacancy rate for office buildings also quadrupled over the past three years.

Yet at the same time, the cost of renting office space is more expensive here than any other place in the U.S. The same goes for housing prices. The average monthly expenditure for a family living in Silicon Valley in June this year was four times higher than the national average. There are worries that the jobless rate will only sink further as American companies in Silicon Valley seek to hire low-cost labor from China, India and Czechoslovakia by outsourcing their work.

However, Business Week had this optimistic spin on things in the area: “Silicon Valley is still a hub for innovation and state-of-the-art technology. There exists no place like it in terms of competent engineers, tech-savvy marketing experts, professional lawyers and a strong infrastructure.”

Above anything else, venture capitalists who suffered when the bubble burst over Silicon Valley at the end of the 90s are now pouring a colossal amount of money back into the area. This implies that investors are still drawn to the area. Some 33.6 percent of U.S. venture capital funds went to Silicon Valley for the creation of new businesses. Business Week explained, “Job creation capabilities are dependent on new entrepreneurship. So, this is a positive sign.”

Regarding the trend of labor force outsourcing, the magazine said, “We should pay attention to the fact that core businesses still reside in Silicon Valley.”

According to the magazine, the “Unemployment rate for San Jose in 1993 went up to 7.3 percent, but with the appearance of internet businesses such as Netscape, the local economy rejuvenated. Likewise, the place still has a high potential to become a source for further growth of budding technologies, including biotechnology.”

Seung-Jin Kim sarafina@donga.com