Discover International City

Silicon Valley

Presented by 3boys3girls

Agenda

Background information
-The USA
- Silicon Valley

Successful
factor of the
Silicon Valley

Insight and future

forecast

Background information of the USA

Background Information of the USA

Population: 320,489,000
The third most populous nation in the world, after China and India

Area: 9.85 million km2

The worlds fourth-largest country by total area

National Language: English

Recognized regional languages:

Spanish, French, Hawaiian ,etc.

Background Information of the USA

GDP

in 2014:
USD$17,416,253million
The highest in the the world

Gross domestic product (GDP) of the main industrialized

Gross domestic product (GDP) of the United States
and emerging countries in current prices in current
2014
prices from 2008 to 2018

Background Information of the USA

GDP Contribution by sector:

Services - 79.7%
Industry - 19.1%
Agriculture - 1.12%

GDP Contribution by Sector

Service

Industry

Agriculture

Background information of the Silicon Valley

Background Information of the Silicon Valley

Silicon Valley is a nickname for the southern portion of the San Francisco
Bay Area of Northern California in the United States
Silicon Valley is one of the most educated regions in California
Located in suburb region
50% of Whites and Asians holding at least a Bachelor degree

Background Information of the Silicon Valley

Silicon Valley is a leading hub for high-tech innovation and development
Accounting for one-third of all of the venture capital investment in the Un
ited States
Thousands of high technology companies
are headquartered in Silicon Valley
e.g. Apple Inc., eBay, Google, Intel.

Background Information of the Silicon Valley

High-tech companies in silicon valley are growing bigger and
now accounts for one-quarter of all the employments in silic
on valley (350000) (+3%)
Job growth driven primarily by computer hardware design, i
nformation services and other high-tech industries.
Patent registrations over 6000, 8% increase from previous y
ear.
Apple (124 billion), Microsoft (63billion) and Google(57billio
n) are the top 3 valuable brands in 2014, and Tech Brands d
ominate the Top 25, like Facebook, which got a +74% increas
e.

Background Information of the Silicon Valley

Successful factors of the Silicon Valley

PEST Analysis-Political
Government type: Democracy
- Political stability
Legal system
- Freedom and Right
- Employment Legislation
Corruption
- The United States is the 17th least corrupt country in the w
orld

PEST Analysis- Economical

Good entrepreneurial atmosphere
Trade Association
Increase cooperation between different companies
E.g.: Silicon Valley Leadership Group founded in 1978 by David Packar
d of HP

Huge investment from the market

2013 venture capitalists invested $33bn in US companies more than
four times the amount invested in the entire European Union.

PEST Analysis-Social
Strong Regional solidarity
A sense of colonial relationship with the east in the past
Stanford University take the mission to cultivate talents

PEST Analysis-Technological
High technological knowledge of labour
Silicon Valley University
Stanford University
Origin of the Advanced Research Projects Agency Network (ARPANET)
Origin of SLAC National Accelerator Laboratory

San Jose State University

Information Engineering (rank no.5 in the US)

Carnegie Mellon Silicon University

Technological inventions and discoveries by university graduates

International relationship
Academic cooperations with universities in other countries
- Beijing Institute of Technology (China)
- Minghsin University of Science and Technology (Taiwan)
Many multinational companies in Silicon Valley

The Diamond Model Analysis

1. Firm
strategy
and
rivalry

5.
Chance

The
Diamond
model
2. Factor
Conditio
n
6.
Government

4.
Related
and
supporti
ng
industri
es

3.
Demand
Conditio
n

Firm Strategy and rivalry

Strategy
Adapt innovative approach in research
Patented inventions increased by 15%
No. of patents registered ranked 4th in the world
World's largest science and technology innovation center

Firm Strategy and rivalry

Rivalry
Presence of Competitive Related Industries
Intense technological exchanges
Improved quality
Conglomeration
Smaller start-ups locate near big companies,
be acquired or merged

Factor condition
Human Resources
300 out of 1000IT sector
Knowledge
Strong research universities and laboratories
48 institutions
eg. MIT, Princeton, Stanford, Caltech etc

Factor condition
Capital
2012: nearly $7 billion
First half of 2014 $ 11.6 billion of investment

Top 10 Locations for Venture Capital

Investment (2012)

Factor condition
Infrastructure
Effective transportation network
4 State roads: Highway 101, 280,680 and 880
4 District roads: Highway 17,85,87 and 237
5 Bridges connecting San Francisco Bay

forming a transportation hub

Shorten travel time
lessen transportation cost
International Airport: 2 aircrafts / mins

Demand Condition
Sophisticated and demanding customers
Internal demand
Smartphone user:
60% of the US population use a smart
phone

Computer user:
70% of the US have broadband connections at home
(Source: Nielsen 2013)

Demand Condition
Global Demand
Consumer electronics industry
Generated over US $1 trillion worldwide
in 2014
Smartphones and tablets (> 900millions)

Strong Business to Business(B2B)

relationship

e.g intel's high capacity microprocessor

e.g IBM's microcomputer and PC equipment

Related and supporting industries

Presence of Capable, Locally-Based Suppliers
Eg. Cisco and Apple is supported
by US telecommunication giants such
as AT&T and Verizon.
Reduce cost of transportation
Flexible & Efficient

Chance
Historical factors
Government-sponsored projects foster the development of IT ind
ustries
1950s- microwave technology research for the Cold War
1960s- spy satellites and ballistic missiles research, which give raise of
many successful semiconductor companies

Government
Federal support for research work
Simulative policies to boost the development of IT industries

1. In 1978, the government slashed capital gains taxes and allowed pe

nsion funds to invest in venture fund, venture capital industry thus g
rew 10-fold.
2. Small Business Administration (SBA) encourag
venture capital investment.
E.g. : For every dollar invested, the SBA wou
grant two

Threats and Future Insight

Threats
Silicon Valley's top threat is China

A red-hot Chinese Internet market is challenging the historical dominance of Silicon Valley
Chinas size and population means firms can begin challenging global businesses
Ranking of digital companies 2014 (Revenue)

1.Google ($31.4 billion )

2.Amazon ($10.3 billion)
3.Facebook ($5.4 billion)
4.Tencent China ($5.4 billion )
Others: Baidu ,Netflix, Yahoo, Microsoft, Qihoo, Sina

four of the top 10 fastest growing firms are located within China
alytics)

(Source: Strategy An

Threats
Silicon Valley's top threat is China

Nearly half of worldwide tech execs expect global tech center to move t
o China within four years (out of 668 technology business executives at
$1 billion-plus companies)
Source: KPMG 2014

Chinese is no longer want to dominate just cost-based commodity prod

uction, also want winning in innovation-based economic competition
eview Commission

Source: U.S.-China Economic and Security R

Threats
How to attract and retain employees?
An increase of more than 58,000 jobs in 2014, compared with gr
owth of 4.1% a year ago
Mainly Executives and low-level employees

Problems of low-level employees

wage growth has stagnated
Inflation
High daily living expense
salaries did not rise

Threats
Soaring rental cost
Average rental cost in Silicon Valley Region is
$ 850000,average monthly rental cost is $2,300
the proportion of rent expenses accounted for
more than 35% of low-level employees income
(Source: Joint Venture Silicon Valley2015)

Threats
Overburdened infrastructure

economies of scale in the 2014 continues to expand built on a statio

nary infrastructure
12 million square feet of commercial space, three-quarters do not h
ave any means of transport to get there

Pollution problem

Decline in the ecosystem

Solutions
Solution 1: Increase competitiveness
1. Set up the infrastructure to support the develo
pment
E.g. Building Main road to alleviate the traffic
problem
2. Providing an appropriate housing policy
E.g. develop new town, encourage property de
veloper to increase the height of the building > increase supply of housing
3. To have a more comprehensive urban and eco
nomic planning for the place

Solutions
Solution 2: Government cooperation
E.g. Sustainable Silicon Valley (SSV)
Focusing on the ecological sustainability of Silicon Valley

Future Insight
Continue to prosper because of her unique characteristics
1. Thousand of startups conglomerate in Silicon Valley annually
2. Lots of venture capital, angel funding flows in Silicon Valley
3. Attract new innovative talents to Silicon Valley because of brand n
ame
4. The innovative mindset