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 world‘s 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 and emerging countries in current prices in 2014

Gross domestic product (GDP) of the United States at current 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 United

StatesThousands 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 silicon valley (350000) (+3%)• Job growth driven primarily by computer hardware design,

information services and other high-tech industries.• Patent registrations over 6000, 8% increase from previous year.• Apple (124 billion), Microsoft (63billion) and Google(57billion) are

the top 3 valuable brands in 2014, and Tech Brands dominate the Top 25, like Facebook, which got a +74% increase.

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 world

PEST Analysis- Economical

• Good entrepreneurial atmosphere• Trade Association• Increase cooperation between different companies• E.g.: Silicon Valley Leadership Group founded in 1978 by David Packard 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-TechnologicalHigh 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 UniversityTechnological 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

The Diamond

model

5. Chance

6. Government

3. Demand Condition

4. Related and

supporting

industries

2. Factor Condition

1. Firm strategy

and rivalry

Firm Strategy and rivalry

Strategy

Adapt innovative approach in researchPatented 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 IndustriesIntense technological exchangesImproved qualityConglomeration • Smaller start-ups locate near big companies,

be acquired or merged

Factor condition

Human Resources300 out of 1000IT sectorKnowledgeStrong research universities and laboratories48 institutions eg. MIT, Princeton, Stanford, Caltech etc

Factor condition

Capital2012: nearly $7 billionFirst half of 2014 ： $ 11.6 billion of investment

Top 10 Locations for Venture Capital Investment (2012)

Factor condition

InfrastructureEffective 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 Bayforming a transportation hubShorten travel timelessen transportation costInternational Airport: 2 aircrafts / mins

Demand Condition

• Sophisticated and demanding customers Internal demandSmartphone 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 ConditionGlobal DemandConsumer electronics industryGenerated over US $1 trillion worldwide in 2014Smartphones 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 factorsGovernment-sponsored projects foster the development of IT industries• 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 pension funds to invest in venture fund, venture capital industry thus grew 10-fold.

2. Small Business Administration (SBA) encourages venture capital investment. E.g. : For every dollar invested, the SBA would 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

• China’s 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 (Source: Strategy

Analytics)

Threats

Silicon Valley's top threat is China

• Nearly half of worldwide tech execs expect global tech center to move to 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 production, also want winning in innovation-based economic competition

Source: U.S.-China Economic and Security Review Commission

Threats

How to attract and retain employees?• An increase of more than 58,000 jobs in 2014, compared with growth

of 4.1% a year agoMainly Executives and low-level employees

• Problems of low-level employeeswage growth has stagnated InflationHigh daily living expensesalaries 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 stationary

infrastructure• 12 million square feet of commercial space, three-quarters do not have any

means of transport to get there

• Pollution problem• Decline in the ecosystem

Solutions

• Solution 1: Increase competitiveness1. Set up the infrastructure to support the

developmentE.g. Building Main road to alleviate the traffic problem

2. Providing an appropriate housing policyE.g. develop new town, encourage property developer to increase the height of the building -> increase supply of housing

3. To have a more comprehensive urban and economic 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 characteristics1. Thousand of startups conglomerate in Silicon Valley annually2. Lots of venture capital, angel funding flows in Silicon Valley3. Attract new innovative talents to Silicon Valley because of brand name4. The innovative mindset