Chips Matter

By Emily Parsons | August 17, 2021

Silicon Valley’s Past, Present, and Future

Semiconductor chips are front page news. Tech IPOs are breaking records. Big company leaders are testifying in Washington. What year is it?

For journalist Michael Malone, it could be 2021… or 1985. His book The Big Score recounted the history of Silicon Valley, from the founding of Hewlett Packard in the 1930s through the Valley’s meteoric rise in the ’70s and up until it was published in ’85. While the book illuminates how much tech has changed since then, it also reveals striking parallels to current challenges facing the industry.

With The Big Score’s recent republication, in a virtual CHM Live Event on July 20, 2021, Malone and NBC technology and business reporter Scott Budman explored connections between the Valley’s history and pressing current issues as well as its future trajectory.

Chips Matter

For decades, Silicon Valley was known as the heart of the semiconductor industry. Chip company leaders were the Valley’s “rockstars,” while electrical engineers built the technology backstage. The focus on chips persisted into the 1990s, when Intel launched its famous “Intel Inside” marketing campaign to encourage customers to buy PCs containing Intel chips.

But in the past couple of decades, the internet and social networks led to Silicon Valley’s fundamental shift from hardware to software. The tech industry focused on operating systems and apps, while chips became more deeply embedded in our technology. Though semiconductors remained crucial, they were no longer the hot technology.

Michael Malone describes Silicon Valley’s fundamental shift from hardware to software.

Recently, chips have made an unexpected return to the spotlight. The COVID-19 pandemic has caused significant disruption to the semiconductor supply chain and resulted in shortages across industries. We are reminded that chips are central to everything from smartphones to game consoles to cars.

“Chips matter, because everything flows from that,” says Malone. “We get excited about the latest new technologies and products and companies, but in the end, it all depends on getting those chips built.”

One solution could be to return some semiconductor manufacturing to the US, though it would likely take two to three years to make this a reality.

The Dark Side of Success

Concrete tilt-up buildings in the middle of orchards, with very few freeways and no smoke stacks. This is how Malone describes Silicon Valley in 1985. By all appearances, its semiconductor industry was clean and safe.

In reality, the industry used very dangerous chemicals that polluted the local environment. Malone and colleague Susan Yoachum helped call attention to the issue through a four-part series on toxic chemicals in the Valley.

Now that software dominates the Valley, says Malone, “The toxic threat is not to our bodies, but to our brains.” Social media has allowed dangerous untruths to circulate—for example, misinformation around COVID-19 vaccines. At the same time, Malone argues that debate is crucial and that censoring heterodox points of view could prevent us from finding solutions to problems. He is concerned about big tech companies deciding what we should know.

“Tech has, in the last decade, begun to narrow the area in which we are allowed to operate in our thinking, in our speech, and everything else,” says Malone.

Malone emphasizes that the digital world, unlike the natural world, was specifically designed for us—”to entertain us, to manipulate us, to take our money, to empower us.” The challenge is maximizing the positive effects, and mitigating the negative ones.

Michael Malone explains why freeware is a pernicious Silicon Valley invention.

IPO Valley

In 1985, Silicon Valley was still establishing its reputation as an enclave of high technology. The Apple IPO in 1980 was a big turning point, with employees who owned founder’s stock becoming millionaires overnight. This showed the world that “technology is hot, it’s going to be worth a lot of money, and we can all get in on it,” says Malone.

The IPO also shined a spotlight on Steve Jobs, who helped usher in the era of what Budman calls the “casual rockstar CEO.” Jobs became famous for his informal appearance, even posing on magazine covers barefoot. Though this seemed at odds with his hard-charging approach to business, Malone says, his clothes made a statement: “I'm not one of them, I'm not of that generation, we're the new crowd, we will dress and behave the way we want." Marc Andreesen followed Jobs’ lead and rose to prominence after Netscape went public in 1995, helping IPOs become the emblematic event of Silicon Valley.

In the 2000s, it became increasingly common for startups to be sold to a big company rather than go public themselves. “For a long time, every business plan said at the end, ‘and then we’ll sell to Google,’” says Malone. This allowed startups to cash out and big tech companies to stay perpetually young by absorbing their up-and-coming competitors. Malone thinks the trend isn’t healthy for the Valley. Most of the companies he featured in The Big Score are gone today, which he believes is a good thing. “We constantly need to refresh with new talent, new companies, new ideas.”

Michael Malone explains his concerns about M&A by big tech companies.

Fortunately, tech IPOs have taken off again in the past few years. “That, as much as entrepreneurship, is the heart of the Valley,” says Malone.

A Landscape of Opportunity

Over the years, Malone has declared Silicon Valley dead about four times. “I was wrong every single time,” he says. Though he worries about big companies maintaining too much control, he believes the Valley will persist as long as its entrepreneurial core stays strong.

Throughout the Valley’s history, Moore’s Law has played an important role in driving entrepreneurs. Faster, more capable, and more affordable computers made new innovations possible—for instance, reductions in the cost of computer memory enabled Nolan Bushnell to found Atari and help create the video game industry. Every two to three years, the opportunity for significant innovation continues to arise.

Michael Malone explains how Moore’s Law enables great inventions.

As for the next great invention, Malone thinks it’s just around the corner. He guesses that it could be battery power or artificial intelligence, but he expects to be surprised. “We can’t predict it, we can’t depend upon it, but it always shows up.”

Watch the Full Conversation

The Big Score: Silicon Valley From the Beginning | CHM Live, July 20, 2021

About The Author

Emily Parsons is a researcher and content developer for the Exponential Center at the Computer History Museum. Her research on entrepreneurs, venture capitalists, and other key figures in Silicon Valley’s innovation ecosystem contributes to the development of educational content for a variety of Exponential Center initiatives.

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