Signs of recovery emerging in Silicon Valley

Two important signs of economic recovery turned up in the San Jose Mercury News this week.  First is an apparent boom in the chip industry, and second is an uptick in business at Buck’s Woodside Café. 

The Semiconductor Industry Association (SIA) announced that May sales had surged to a record $24.7 billion dollars.  Because of the ubiquity of chips in products ranging from refrigerators to airliners, semiconductor production can be viewed as a leading indicator of a market recovery, and the SIA is predicting a near 30 percent increase in sales for the year. 

Of course, the industry was hedging its bets a bit in its announcement.  SIA president George Scalise noted “the semiconductor industry’s growing sensitivity to macroeconomic conditions,” including declining consumer confidence and pressure to reduce government spending.  But, it is the positive side of macroeconomics such as growing worldwide markets, pent up demand by businesses to replace outmoded equipment, and a rebound in traditional industries such as automotive that are driving the chip market barometer into positive territory, though some of these indicators have been dipping as of late. 

Semiconductors enable technology developments such as longer battery life in cell phones, safer automatic landing systems on airplanes, and more secure anti-lock brakes on automobiles.  They also provide the touch-screen controls that we all demand of everything from iPads to sewing machines. 

So, you might argue that what’s good for the chip industry is good for General Motors and America.  But, a robust chip industry will not bring back large numbers of jobs in the United States.  While American companies such as Intel dominate the chip market, more and more of their manufacturing has already moved overseas.  And even the U.S. based wafer fabrication facilities (known as wafer fabs) have little effect on employment numbers because they are so heavily automated. 

In fact, the chip industry has been outsourcing its most labor-intensive work (known as packaging and testing) for decades to countries such as Malaysia and Singapore. 

So, that brings us to better news about the future over at Buck’s.  This Silicon Valley landmark is rightly known as the deal-making capital of the region, and these days, it’s a full house for breakfast.  Venture capitalists, angel investors and entrepreneurs are spinning out new ideas while they consume their yogurt and granola or Buck’s famous pancakes. 
Not too many months ago, according to owner Jamis MacNiven, “it was as bleak as it has been.”  But the business cards are flying once again at Buck’s, and new ideas, such as the Tesla electric vehicle, are in serious discussion by the elite of high-tech. 

MacNiven and his wife (who co-owns the café) have seen the high and the mighty at this unconventional watering hole:  Warren Buffett, Nicolas Sarkozy, and Michelle Pfeiffer are among the names the couple can rightfully drop.  Buck’s was one of my haunts when I worked in high-tech, and I recall a time when secret service types came in, followed by the arrival of a long, black limousine and a guy we all thought was the Prime Minister of Israel. 

What’s important about Buck’s is that it’s another sign that the Valley is humming with business development, and real money is changing hands.  Let’s hope the SIA is right and the chip market continues its boom, and that there’s a line outside of Buck’s for many months to come.