Santa Clara Valley Historical Association

The Making of Silicon Valley

Strong waves of creative energy have flowed in recent decades from a place known as “Silicon Valley,” encircling  — and changing — the world.

The phenomenon known since the 1970s as Silicon Valley can be traced to origins in the 1890s when Leland Stanford established a university at Palo Alto and urged that its students not only gain knowledge but be able to apply their learning in the real world. Pioneer professors, especially in the sciences and engineering, took Senator Stanford’s cue and collaborated with nearby industries from the outset.

As the 20th century began, wireless radio captured public attention, soon after introduction of the telegraph and the telephone. The wonder of Morse code or the human voice riding mysterious air waves excited adults and youths alike. Palo Alto became an early test bed for radio experiment. Later it became the locale for development of continuous-wave transmission powered by arc generators, thanks to engineer-entrepreneur Cyril Elwell. Elwell employed a radio research team including Lee de Forest, who in 1906 had invented a three-element vacuum tube in New York. In 1912 the team discovered that the tube, which de Forest  called the audion, could be rigged as an amplifier. This was a major breakthrough. It was first exploited in long-distance telephony, then in radio, and later in other tube-powered devices, such as radar, television, and computer systems, over a span of about 40 years.

Radio took root on the San Francisco Peninsula. In San Jose, Charles Herrold began the first regularly scheduled radio broadcasts in 1912. In Palo Alto, the Federal Telegraph Company established by Elwell created ocean-spanning networks, supplying U.S. Navy communications during World War I. Many of Stanford University’s electrical engineering graduates worked at Federal for a time. Tube-making companies were founded on the Peninsula, and a technical community built up. At Stanford, Frederick Terman became the leading academic authority on radio engineering.

At Stanford, physics professor William Hansen developed insights that were applied by the Varian brothers in the klystron tube and later in linear accelerators, which proved useful in smashing atoms and treating cancer. A generation of microwave engineers emerged, helping to win World War II and afterward exploiting television and long-range communications.

In the postwar years, Hewlett-Packard Company became the dominant local electronics company, developing measuring equipment, scientific instruments, a programmable calculator, and ultimately computers, printers and other peripherals.HP also served as a management school.  Droves of its graduates became mainstays of other companies.

Meanwhile, in 1947 a Bell Labs team led by William Shockley invented the transistor, which after years of development would replace the electron tube. Shockley returned to Palo Alto, his boyhood home, to commercialize the transistor. Eight crack young scientists and engineers he had recruited as assistants broke away and formed Fairchild Semiconductors. Led by Robert Noyce, they invented a practicable integrated circuit and delved into the chemical magic of planar processes. Solid state physics took hold, ultimately chasing away most Peninsula microwave development. From crude ICs that many companies built on their own for a time, the art developed more and more specialties.

IBM’s invention of the random-access memory system in San Jose energized the infant computer industry and grew an entire new branch, disk drives.

The Cold War and the space race gave big boosts to electronics and aerospace companies. Semiconductor development surged. Then Fairchild Semiconductor all but self-destructed. That explosion left dozens, nay scores, of glowing embers in the Valley.

Intel was one of the companies formed by Fairchild refugees. Intel pioneered the art of putting read-only computer memory on chips, and then scored the most important breakthrough of the latter 20th century, the creation of the microprocessor. Ted Hoff proposed the architecture and Federico Faggin made it work. These computers on a chip, growing ever more powerful, at length enabled Silicon Valley’s microcomputer industry to dethrone the Boston area minicomputer companies. The advent of the personal computer, pioneered by young Steve Wozniak and Steve Jobs, also was a vital element in the computer revolution.

The phenomenal development of semiconductors and electronics fed upon itself. Ambitious engineers, entrepreneurs, and managers began to see Silicon Valley as a mecca. They came sometimes directly to industry, sometimes with a stop at Stanford or the University of California at Berkeley for a Ph.D. or an MBA — to learn and to look for a new wave to ride.

Opportunity could be read in the many personal and corporate successes. The local climate was benign, the culture open and exciting. The Valley was experiencing a wave of intellectual and creative energy at least the equal of any in the European Renaissance four to five centuries earlier. Investors were attracted, and a venture capital community gained heft.

Semiconductor manufacturers at first made their own processing equipment, but as processes became more complex, equipment manufacturers took over that job, became a separate industry, and eventually automated their clever systems.

Research may be more advanced in Silicon Valley than anywhere else, and not only in the universities and SRI International (a precedent-setting applied research facility), not only in the government’s Ames Research Center and Lawrence Livermore Laboratories, not only in such world-renowned industrial research centers as IBM’s and HP’s and Lockheed Missiles & Space Company’s and the Xerox Palo Alto Research Center, but in almost every high technology company. As for development, industries have honed their timetables, telescoping the time required to bring a product to market — a better quality product than the one it replaced.

Management processes created in the Valley are likewise noteworthy. Hundreds of new techniques and styles have blossomed, and some of them are exemplary. Law practice relating to high technology has been drastically altered. Marketing communications specialists have broken new ground. Desktop publishing arose in the Valley, as did the quantum jump in movie special effects powered by 3-D computing.

Another industry, biotechnology, sprang from discoveries of gene-splicing and gene-cloning at the great Bay Area universities.

Part of what makes Silicon Valley tick is the sharing of knowledge. Boundaries that once isolated companies or academic departments are breached not only in industry but on campus, creating cross-fertilization and new synergy. For example, visionaries have applied fast computers to new kinds of drug research, and advances in lasers to new medical devices. Many a technical or management bottleneck was broken by the sharing of information and experiences, usually not directly with a competitor but with a peer or a mentor.

Primary dissemination of knowledge occurs at the universities and at exceptional four-year colleges and two-year community colleges. San Jose State University is renowned for supplying high technology companies with more engineers than come from all other colleges combined.

Even companies accustomed to doing everything “in house” learned that that was no longer necessary. The Valley had grown an infrastructure. This supporting network of suppliers and service providers allows companies to focus on their special skills and hire help to fill the gaps. They get quick service on components, design, and other orders.

Riches have rewarded the Valley’s output. To some participants, money is a great motivator; others thrive on the sheer excitement of helping to create something new and different. Even after 25 or 30 years of start-up companies granting stock options, initial public offerings still create instant multimillionaires at high tech companies. Beyond the lifestyles it enables, money is an essential fuel for such companies, for the cost of building plants and ramping new production have soared while the interval between new products has shortened.

“Silicon Valley” is a term coined by a trade press editor in 1971.  Insiders who use the term mean more than a place, they mean a culture too. The heartland runs from San Carlos and Redwood City through Menlo Park, Palo Alto, Mountain View, Sunnyvale, Cupertino, Santa Clara, San Jose, and Milpitas. Strong outposts are in Fremont, Hayward, San Leandro, Emeryville, Berkeley, San Ramon, Pleasanton, San Rafael, South San Francisco, Scotts Valley, and Monterey. Given today’s digitized home offices and telecommuting (or the local tradition of starting a business in one’s garage), power centers might also be found in such lush foothills residential towns as Hillsborough, Woodside, Portola Valley, Atherton, the Los Altos area, Saratoga, Monte Sereno, and Los Gatos.

Not every Silicon Valley leader views its burgeoning as a renaissance. However, most do, and at present they can see no end to it. Technologies will inevitably change, but they expect the entrepreneurial and creative drive to carry far into the 21st century, and perhaps much farther.

Read about the Stanfords and the Founding of a Great University

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