2007 Silicon Valley Projections - Silicon Valley Leadership Group

Silicon Valley Industry Overview
Manufacturing/production, distribution, shared services, and
customer support are developing platforms upon which to
support the launch of a new product or service into the market.
They are necessary to keep the company going–but not at the
core to the early success. Some are outsourced, some growing
in scale and maturity internally. Generally speaking, the
talent needs are more ubiquitous, yet the costs of this labor
and capital investment, real estate, taxes, and services begin
to rapidly escalate as the company progresses through the lifecycle
to adulthood. As the company finds its way into the
adulthood and maturity stages, the size, scale, and costs of the
downstream value chain have escalated to the point that they
can be a drag on growth and profitability. Not only have these
support activities grown disproportionately in size, put they
typically grow without design for efficiency, process,
economies of scale, and performance.
In the Bay Area, with its high-cost structure and the business
climate that has evolved, the costs to maintain and operate the
downstream activities of the value chain may well become
prohibitive. Facing the dramatically lower costs of geographies
that compete for each of these segments of the Value
Chain, especially international competitors, many Silicon
Valley companies are forced to explore reducing the size
of these functions–through reengineering, outsourcing or
redeployment–not uncommonly offshore.
• The 1970’s witnessed the beginnings of the exodus of
manufacturing from the Valley. Moving in concentric
waves— manufacturing operations fled first to lower-cost
locations in the Bay Area and the State, then to surrounding
states and the West, then Mexico, and now China and
other, once unimagined niches around the globe. Today, it
is largely highly specialized manufacturing linked to core
processes that remain in the Valley.
Silicon Valley’s Competitive Position
Consulting LLP.
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