World-Class Communities -- San Jose's 24/7 Productivity

Dec. 21, 2004
Despite the downturn, the Silicon Valley hub still spawns new companies, processes, products.

On the elevator at Sierra Studios, one of downtown San Jose's dozens of hotels catering to long-term visitors, cacophony erupts on a Tuesday night in January. The elevator seems to be stuck between floors, and passengers debate what to do. A man recently arrived from India tries to pry open the doors. Another rider, with an Irish brogue, suggests pushing the emergency button. A guy from Taiwan complains that he's already late for a promised call home. A New Yorker just listens -- and then the elevator starts to move again. The San Jose metro area, the self-proclaimed capital of Silicon Valley, is a place where everyone seems to come from somewhere else. Japanese, Peruvian, and Ethiopian restaurants reflect the diversity. Even in winter the weather is nice in San Jose. But people don't flock to Silicon Valley for the quality of life. The high-tech gypsies come seeking their fortunes. Just ask Timothy Dixon, vice president of marketing at Calient Networks Inc., a developer of photonic-switching technology. Over the last 20 years the telecommunications veteran has lived in Chicago, Washington, D.C., Germany, and Dallas, which he left in 1999 to move to San Jose to help launch Calient. "You need to look a CEO in the eye when you're building a vision for a new company," he says, explaining why he moved to the Valley. Calient established its headquarters and a research and development operation in San Jose because company executives knew the community would provide a talented pool of engineers skilled in photonics technology. They lured employees from Nortel Networks Corp. and Cisco Systems Inc., San Jose's largest private-sector employer, which boasted a staff of 13,950 in 2000. Engineering talent is just one advantage drawing businesses to the Valley. San Jose swarms with smart, ambitious people. They work in the region's strongholds including software, biotechnology, and semiconductors. Silicon Valley hums 24/7 with entrepreneurs promoting fresh ideas. "You can go into a coffee shop at 11 p.m. and see people talking about business, scribbling notes, being charged up," relates Dixon. Those impromptu conversations lead to new companies, processes, and products. Indeed, San Jose leads the U.S. in patents issued -- 4,931 in 1998 compared with Boston's 3,687. There's also the renowned concentration of venture capitalists. Last year local companies collected $17 billion in investments, a 104% increase from the $8.4 billion raised in 1999, according to the 2001 Index of Silicon Valley published by Joint Venture Silicon Valley Network. Billions came from local venture-capital strongholds dotting the famed Sand Hill Road. When Calient raised $250 million in late 2000 and early this year, a chunk came from local venture capitalists and manufacturing companies such as Juniper Networks Inc. Money doesn't quite grow on trees in Silicon Valley, but term sheets are more common than locally produced apples or apricots. The transformation from farmland to technology orchard started more than 50 years ago. The community now even boasts its own high-tech tour, mimicking the ones around Hollywood that take fans past celebrities' homes. The pilgrimage begins at the Palo Alto garage where in 1939 Bill Hewlett and David Packard launched the company that became $48 billion Hewlett-Packard Co., a leader in computers, imaging, and now the Internet. It visits the Palo Alto storefront that held Fairchild Semiconductor International. Inc., which became a trailblazer in the computer revolution by mass-producing the integrated circuit. The tour covers the Palo Alto Research Center, which Xerox Corp. founded in 1970 to bring together world-class scientists to think about information technology. In Los Altos, visitors can see Steve Jobs' parents' house, the birthplace of Apple Computer Inc. Key To Success For all those visitors interested in the magic of Silicon Valley today, there's no better place to see it than in Milpitas at Solectron Corp., the world's largest contract manufacturer. Silicon Valley's manufacturing success now depends heavily on its productive workers, and Solectron employs some of the best. Manufacturing employees in the San Jose metropolitan area are almost twice as productive as workers in other parts of the country. They added $124,055 in value to goods manufactured in 1998, compared with the $73,217 added by all manufacturing workers nationwide, reveal the most recent U.S. Commerce Dept. data. Less than 10 miles from downtown San Jose, in the middle of the anonymous office park that Solectron calls home, stands Building 3 where workers make some of the world's fastest Internet routers. The $14 billion corporation runs about 60 factories from Kanagawa, Japan, to Bordeaux, France, and Building 3 is among its most productive. So intense is the interest in Building 3 that at least 100 different delegations from customers and other companies come to the facility for tours every year. There they see workers soldering and pressing tiny parts onto notepad-sized cards that go into routers, which direct the Internet's electronic traffic and cost as much as $1 million each. Line workers are paid $15 or more an hour. Solectron's chairman, president, and CEO Koichi (Ko) Nishimura calls himself a Silicon Valley old timer. Born in Pasadena, he moved to the valley in 1938 and knows the region's advantages and flaws as well as anyone. The San Jose area's openness to new ideas and people continues to make it thrive, he says. "Outsiders are allowed to join the club; the barriers to entry are lower than anywhere else," Nishimura states. And he is proof of what he says. He's a second-generation Japanese American who spent five years in a California internment center during World War II and didn't speak English until elementary school, and who now is chief executive of one of Silicon Valley's leading companies. Nishimura operates a club of sorts. It includes suppliers and customers -- such as Cisco Systems and Juniper Networks -- that are also neighbors. When people at those companies have a question or a problem, they can head over to Solectron's headquarters. "Somehow we all keep in touch. Last week a CEO, who's also a personal friend, called and we started talking about the digital divide," recalls Nishimura. "My view is that there isn't one. It's a reading and comprehension problem." The San Jose area confronts some tough issues, and math education is one of them. High-tech companies like to hire locally, and they need graduates who excel in calculus, trigonometry, and other tech-related subjects. The pool of talent is shrinking. In 2000 enrollment in intermediate algebra in high schools fell by 35% from 1999. Still, the San Jose area exudes the entrepreneurial, can-do spirit that bodes well for its future. "When we want to get something done, it gets done," emphasizes Nishimura.

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