It’s easy to forget in the app era, but Silicon Valley got its name from microchips. The generation that transformed orchards into Oracle did so by manufacturing electronic circuits that encrust “chips” of a semiconductor material, usually made of silicon. In the fertile purlicue south of San Francisco, the foundations of the electronic revolution were invented, designed, and manufactured. Shockley Semiconductor, Fairchild Semiconductor, Intel, and other integrated-circuit makers thrived. Computer makers who used their parts burgeoned too. Software and services came next, and then the venture capital to fund these efforts.
Today, the capital and the software remain, and some computer and device makers, too. But the integrated circuit business has largely left the region. Silicon is etched into Silicon Valley mostly in name. The reasons are many. Land, housing, and labor became more expensive. Other countries, most of them in East Asia, created incentives for semiconductor manufacture. Global just-in-time manufacturing, along with the low cost of shipping small, light microchips around the world, made vertical integration less desirable.
This is a useful lens through which to view an explosive story published this week by Bloomberg Businessweek. The report claims that Chinese spies systematically infiltrated U.S. corporate and government computer systems by installing hardware exploits on the motherboards of servers destined for widespread use, from video-streaming services to the CIA. According to Businessweek, the infected machines provided a backdoor into any network on which the machines were installed. The reporting claims that at least 30 U.S. companies were affected, including Apple and Amazon, the most valuable companies in the world. Both companies have vociferously denied the claims, but Bloomberg stands by its story.