The Multinational Monitor


S I L I C O N   V A L L E Y

Down in Silicon Valley

Many view it as the promised land. But the silicon wafer is not manna from heaven.

by Lenny Siegel

Twelve years ago no one had heard the term "Silicon Valley." Today Silicon Valley is known universally, from Taiwan to Tennessee, from Tijuana to Tipperary, as the center of the micro-electronics "revolution."

The Santa Clara Valley, at the southern edge of California's San Francisco Bay, is home to more than 1100 high-tech factories, including the headquarters of such well known firms as Apple Computer, Atari, and Hewlett-Packard. Large national and multinational firms, such as IBM, Lockheed, Sylvania, Nippon Electric, and Philips, have major branches in Silicon Valley.

Silicon Valley's high-tech firms employ some 200,000 people. The semiconductor industry employs about one third of the total. Manufacturers of computers and computer peripheral equipment represent about one fourth of the workforce. Other major sectors are instruments, guided missiles, communications, computer services and software, and research and development. During 1982, a slow year by any measure, electronics employment in Santa Clara County (most of Silicon Valley) still rose by 1,100.

But the Valley is not merely a center of high-tech employment. It is a hotbed of industrial innovation. More than one sixth of the $7.2 billion in venture capital now invested in the U.S. has gone to firms in Santa Clara county. In the fourth quarter of 1982, at least 49 Bay Area firms, including 20 start-up companies, received more than $92 million in venture capital; most are based in Silicon Valley.

New businesses are sustained by an elaborate network of support industries, including more than 3,000 consulting firms. "Unlike any other U.S. area," the Bank of America reported this February, "Silicon Valley has reached a critical mass of talent, experience, energy, and capital that stimulates the creation of new firms."

Silicon Valley appears, at first glance, to be a fantastic success story. Governors, mayors, and chambers of commerce from throughout the United States constantly visit the high-tech mecca, hoping to entice growing high-tech firms to set up facilities in their backyards. The Valley's image is as shiny as the surface of a silicon wafer. High-tech is considered a clean, light industry that can employ the unemployed and fatten the paychecks of the average worker. Unfortunately, though high-tech is a growing industry, it is not the panacea that many think.

One common myth about Silicon Valley is that the average worker strikes it rich and shows it by driving a Porsche. It is true that a number of high-tech entrepreneurs have "turned silicon into gold," and that many engineers and managers earn enough money to drive Porsches and otherwise display their wealth.

But about 60 percent of the Valley's high-tech workers are either production or clerical workers. Nearly one quarter of the electronics workforce consists of semi-skilled operatives, 69 percent of whom are women. Over half of the operatives are nonwhite, principally Hispanic (generally of Mexican decent), Filipino and Indochinese.

The starting wage for operatives ranges from $3.75 to $5.00 per hour, although some printed circuit assembly subcontractors reportedly pay only minimum wage, currently $3.35 per hour. Workers, even in "clean rooms" designed to protect electronic components from decontamination by tiny particles, are exposed to hazardous chemicals and gases.

Employers energetically oppose all attempts to unionize the electronics workforce. Combined with the high workforce mobility characteristic of a new industry in a rapidly growing community, no labor organization has yet won a bargaining election at an electronics plant in Santa Clara County.

Engineers, programmers, and managers, on the other hand, are primarily white males. Starting pay, for engineers with four years college, is about $23,000. Most firms allow their professional employees a great deal of creative freedom, and many offer amenities such as exercise facilities on company premises to attract young engineers.

Though it is possible for ambitious clerical workers to work their way into sales, public relations, personnel, and management positions, assembly workers, even if they are competent and lucky, can rise no further than technician or line supervisor. The predominantly male professional workforce and the predominantly female production workforce are occupationally, culturally, and even geographically distinct.

Valley of the Jammed

Historically, most of the major high-tech companies in the Valley grew up near Stanford University, at the northern edge of Santa Clara County. As firms hired professionals from other parts of the country - and the world - these highly paid employees clustered in northern county cities. In a 180-degree twist on the typical metropolitan commute pattern, production workers were forced to commute great distances to work, as professionals bought and rented the most desirable housing near northern county industrial parks.

By 1977, rents and home prices were among the highest in the nation, and rush hour congestion had become unmanageable. Things got so bad that even local government recognized the problem, which it labeled the "jobs-housing imbalance." But, despite a series of studies by government and industry, the problems remain.

For several years, a handful of labor activists and environmentalists have challenged the frequent assertion that high-tech industry is "clean and light." Electronics production, particularly semiconductor wafer fabrication and printed circuit board manufacture, are essentially chemical processes, utilizing a variety of hazardous materials and gases and generating all forms of toxic wastes. But the industry, politicians, and the press did not recognize the problem until January 1982, when Fairchild Semiconductor disclosed that a leak from an underground chemical storage tank at its plant in southern San Jose had contaminated wells providing drinking water to the surrounding community.

Stung by widely publicized charges from Fairchild's neighbors that the contaminated water, containing trichloroethane, had caused a number of miscarriages and birth defects, industry and government began developing a model ordinance, strictly regulating the storage of hazardous materials and wastes. Pressed by labor, environmental, and other activists, two cities in the County have adopted the ordinance, and others are likely to follow.

Even before the development of the storage ordinance, Silicon Valley companies have been subject to a complex set of federal, state, and regional rules regulating their handling of sewage, solid waste, and atmospheric emissions. The cost of enforcing those measures-or alternatively, cleaning up after the electronics industry in the absence of strict controls-is a little known but significant cost of hosting such a "clean, light" industry.

The Jobs Race

The promotional delegations that visit Silicon Valley all hope to grab a slice of the high-tech "wafer." But there really isn't enough wafer to go around. Stanford researchers Henry Levin and Russell Rumberger wrote recently, "Although employment in high technology occupations will increase quickly in percentage terms over this decade, the contribution of these jobs to total employment growth will be quite small."

The international competition for high-tech jobs is equally fierce. Countries like Ireland, Malaysia, and South Korea operate continuing campaigns to attract high-tech investment, while other countries send regular delegations to Silicon Valley. Electronic industry leaders warn about the Japanese threat to American technological leadership, but Silicon Valley chip manufacturers have more employees in Asia than in the U.S. That contradiction doesn't deter American electronics executives, however, from using the rise of Japanese high-tech competence to lobby the U.S. government for tax and research subsidies. Some of the U.S. firms most strident about the Japanese threat even cooperate closely with Japanese companies. National Semiconductor, for instance, markets Hitachi mainframe computers.

War and Peace

Spawned by Stanford University's Engineering School during the early 1950's, the Santa Clara Valley high-tech industrial complex was fed by research and production contracts from the Pentagon. Only in the early 1970's, when Pentagon money slackened and the first microprocessor was developed at Intel, did the civilian sector take the lead. Several of the pioneers of the personal computer industry actually avoided military work. By the time desktop computers and video games became popular, Silicon Valley's civilian sector had surpassed the Pentagon, which was technologically and economically saddled with bureaucratic procurement standards.

But the military still has a significant presence in Silicon Valley, pouring more than $3 billion a year into the local economy. The Pentagon needs Silicon Valley's brainpower, and it has initiated a number of programs in its attempt to again capture the leadership of the chip and computer industries. It has funded a research and development program to design and process very high speed integrated circuits (VHSIC). It has developed and promoted "Ada," a high level programming language. Ana it funds research on artificial intelligence at several major campuses; it has just announced a major new program to develop the next generation of artificially intelligent computer hardware and software.

In the next decade, the big struggle in the world of high-tech is not likely to be between the U.S. and Japanese companies, but between civilian corporate leaders and the Pentagon over control of the leading edge of U.S. electronics technology. Silicon Valley is sure to be at the center of the struggle.

Lenny Siegel is the director of Pacific Studies Center in Mountain View, California.

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