Silicon Valley: Definition, Where It Is, and What It's Famous for

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Updated August 17, 2023
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Silicon Valley: A global center of technological innovation located in the South San Francisco Bay Area of California.

Investopedia / Joules Garcia

What Is Silicon Valley?

The term Silicon Valley refers to a region in the south San Francisco Bay Area. The name was first adopted in the early 1970s because of the region's association with the silicon transistor, which is used in all modern microprocessors. The area is notable for the vast number of technology companies that are headquartered there.

As such, Silicon Valley is a global hub for technological innovation, where hundreds of companies call it home. It is also known for being a center for innovation, entrepreneurial spirit, and a lifestyle founded on technologically based wealth.

Key Takeaways

  • Silicon Valley is a global center of technological innovation located in the South San Francisco Bay Area of California.
  • The area was named after the primary material found in computer microprocessors.
  • Silicon Valley is home to dozens of major technology, software, and internet companies.
  • Some of the major companies in the region include Apple, Alphabet's Google, Chevron, Meta, (formerly Facebook), and Visa.
  • It is one of the wealthiest regions in the world and one of the hottest real estate markets.

Understanding Silicon Valley

The term Silicon Valley was first used by Electronic News on its Jan. 10, 1971, cover. It was part of a three-part series written by journalist Don Hoefler, who was covering the history of the semiconductor. The term slowly expanded to include and be associated with technology, especially big tech.

Silicon Valley covers an area of 1,854 square miles and is home to about three million people. It is located in the Bay region of California. Although its boundaries are somewhat nebulous, they generally include:

  • All of Santa Clara and San Mateo counties
  • The western edge of Alameda County
  • Scotts Valley in Santa Cruz County

The region's largest city is San Jose. It's also home to Stanford University and several state university campuses. This academic presence has helped fuel a rich research and development (R&D) synergy throughout the Valley.

The number of high-profile ventures born in Silicon Valley has made the region an attractive target for venture capital firms and investors. As many as 117 venture capital-backed initial public offerings (IPOs) in the area were valued at about $253 billion as of the beginning of December 2020. There were a total of 38 Fortune 500 companies located in Silicon Valley as of 2020, including:

  • Some of the most prominent tech companies, such as Apple, Alphabet's Google, Meta (formerly Facebook), and Netflix
  • Hardware and software companies like Cisco Systems, Intel, and Nvidia
  • Giants in other fields, including Visa and Chevron

Special Considerations

The median household income in Silicon Valley surpassed those reported in San Francisco, California, and the United States. As of 2021, Silicon Valley households earned an average of $138,804 per year, while those in San Francisco and California earned $121,826 and $84,907. The national average totaled $69,717.

Silicon Valley is one of the wealthiest regions in the world. Forbes reported there were 313 tech billionaires across the globe with a combined net worth of $1.9 trillion. The 20 most affluent in this sector were worth over $660 billion combined. In 2022, there were 84 billionaires reportedly living in Silicon Valley.

Several business leaders have recently decided to leave the region, taking their businesses to other parts of the United States or abroad. For instance, Tesla (TSLA) chief executive officer (CEO) Elon Musk announced that he was moving to Texas in December 2020. His announcement followed other major companies, such as Hewlett Packard (HPE) and Oracle (ORCL). Forbes reported that Tesla made the move back to California in 2023.

Business leaders leading the move out of Silicon Valley cited reasons like the overall political climate in the region and looser COVID-19 restrictions in other parts of the country (compared to California).

A Brief Timeline of Key Silicon Valley Developments

  • 1939: William Hewlett and David Packard patent an audio oscillator, forming the foundation for the Hewlett-Packard company.
  • 1940s: William Shockley, John Bardeen, and Walter H. Brattain invent the first working transistor at Bell Labs.
  • 1951: Fred Terman establishes Stanford Research Park as a partnership between Stanford University and the City of Palo Alto, providing a base of operations for both military and commercial technological innovations for companies such as Hewlett Packard, Lockheed, and Xerox.
  • 1955: William Shockley opens his own firm, Shockley Semiconductor Laboratory, in Mountain View.
  • 1957: Several Shockley employees resign and start a competing firm, Fairchild Semiconductor. Fairchild employees will later go on to start many other companies, including Intel and AMD.
  • 1958 to 1960: Robert Noyce and Jack Kilby independently discover that all parts of a circuit, including the transistor, can be created using silicon. Their discoveries led to the integrated circuit, created from silicon, used in all microprocessors today.
  • 1961: Former Fairchild backer Arthur Rock establishes Davis & Rock, considered the nation's first venture capital firm, giving rise to a new type of investment industry.
  • 1969: The Arpanet computer network is established with four nodes, including one at Stanford University. Arpanet is the foundation for the internet.
  • 1971: Journalist Don Hoefler publishes a three-part report on the rise of technological development in the region in Electronic News, titled "Silicon Valley, U.S.A." He's credited with creating the region's name.
  • 1970s: Atari, Apple, Microsoft, and Oracle are founded.
  • 1980s: Cisco, Sun Microsystems, and Adobe are founded.
  • 1990s: Netscape, Google, Yahoo, Amazon, PayPal, and Netflix are founded.
  • 2000 to 2010s: Meta, Twitter (now X), and Uber are founded.

The incorporated name of Twitter changed to X Corp. in April 2023. Although the company's name changed, the social media platform's name remains the same.

Major Companies in Silicon Valley

Some of the major companies that call Silicon Valley home. Some of them include:

  • Apple (AAPL): Founded in 1976 by Steve Jobs, the company is based in Cupertino, Santa Clara County. It reported revenue of $394.33 billion in 2022. Apple's market capitalization is $2.73 trillion and its price-to-earnings ratio (P/E) is 29.67.
  • Alphabet (GOOGL/GOOG): The company's headquarters, which is often called The Googleplex, is located in Mountain View in Santa Clara County. Alphabet reported full-year revenue of $282.84 billion in 2022. It boasts a market cap of $1.66 trillion and a P/E ratio of 27.31.
  • Chevron (CVX): This multinational energy corporation calls San Ramon, Contra Costa County home. Chevron reported $235.72 billion in revenue in 2022. Its market cap is $307 billion and the company's P/E ratio is 10.06.
  • Meta (META): One of the largest social media networks in the world, Meta is headquartered in Menlo Park in San Mateo County. The company has a market cap of $750.12 billion and a P/E ratio of 34.31. Meta earned $116.61 billion in revenue in 2022.
  • Visa (V): Visa provides payment services and is headquartered in San Francisco. The company earned $29.31 billion in revenue in 2022. Its market cap is $485.08 billion and it has a P/E ratio of 30.90.
  • Wells Fargo (WFC): This financial services company was founded in 1852 and is based in San Francisco. The company earned $73.78 billion in revenue in 2022. It has a market cap of $155.43 billion and a P/E ratio of 10.53.

Unless otherwise noted, the figures reported above are as of August 17, 2023.

Where Is Silicon Valley in California?

Silicon Valley is located in the southern part of the San Francisco Bay Area of California. It encompasses more than 1,850 square miles in area.

What Is Silicon Valley Famous for?

Silicon Valley is known as a hub for technology companies, including Apple, Meta, Cisco, and other major companies like Visa and Chevron. The region attracts a great deal of venture capital and is home to some of the world's richest people.

Which Cities Are Part of Silicon Valley?

San Jose is the largest city in Silicon Valley. The region also includes Santa Clara, Redwood City, Mountain View, Palo Alto, Menlo Park, Cupertino, and Sunnyvale.

What Does Silicon Valley Unicorn Mean?

A Silicon Valley unicorn is the term given to a private startup in the region that is valued at over $1 billion. The term unicorn is commonly used in the venture capital industry. For instance, San Jose-based Zoom Video Communications (ZM) was valued at $1 billion in 2017. Founded in 2011, the company went public in 2019.

The Bottom Line

The mere mention of Silicon Valley often conjures up ideas of research and innovation for many people. And that should come as no surprise since it is the world's largest hub for technology. Some of the world's largest tech companies were started and are based there. It shouldn't be a shock, though, that Silicon Valley is also one of the richest areas in the world as there were 84 billionaires reportedly living in the area as of 2022.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

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