(Photo credit @viazavier)
I would wager that most people have no idea why the Bay Area is actually called Silicon Valley. Do you? I’ll give you a hint: look down at whatever device you are holding to read this newsletter. Silicon is at the heart of most electronic devices, from smartphones to factory equipment to appliances. Semiconductors (aka integrated circuits, aka microchips) are what power all of the electronic devices you own, and are typically made from silicon.
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Fun fact: my birthday is tomorrow (Sep 19). Best birthday ever as I share it with Soledad O’Brien, Jeremy Irons & Jimmy Fallon. It’s also the anniversary of the day in 1957 that 8 engineers founded Fairchild Semiconductor, whose innovations in transistor technology launched the tech revolution and spawned Silicon Valley. Those 8 engineers are hilariously called the ‘Traitorous Eight’ for leaving their Nobel-prize-winning employer -- but their new company ended up incubating future tech giants like Intel and AMD. Gordon Moore (one of the 8 who also later co-founded Intel) developed the uber-famous Moore’s Law, “the observation that the number of transistors in a dense integrated circuit (IC) doubles about every two years.” This law has influenced the projected rate of production of electronic devices for decades and helped predict that the smartphone in your pocket would become more powerful than a room full of 1969 mainframe computers.
So much of the news today focuses on the software that people utilize on their devices -- but it’s critical to realize: software is only so innovative for users because the devices themselves continue to get smaller and smaller -- and that’s due to the ever-evolving chip technology. This week, US gaming company Nvidia announced the biggest semiconductor deal ever, by spending $40B to purchase Softbank’s chip division ARM (a UK based company). (Great article on why Nvidia CEO made the purchase.) The locations are important as there has been a shift in chip manufacturing to China in recent years, with companies from Apple to Nvidia to Qualcomm all relying on chips manufactured in China/Taiwan. With a growing trade war between the US and China (and specific export restrictions being targeted towards Chinese chip manufacturers like SMIC), the US tech companies are very worried that their chip supply chain will be negatively affected. The US chip industry wants $50B to help keep chip manufacturing in the US and still remain competitive with Asia. And investors are now starting to keep more of an eye on semiconductor stocks vs just the FAANGs.
