What Is Silicon Valley?

Silicon Valley is a region in the south San Francisco Bay Area, made notable by the number of technology companies that started and are headquartered there, including Apple, Alphabet Inc.'s Google, Facebook, and Netflix. The term rose to prominence in the 1970s in reference to the regional businesses' development of and technological reliance on the silicon transistor, which is used in all modern microprocessors.

A global center of technological innovation, Silicon Valley as a phrase refers to the industry and the companies that call it home, as well as to an innovative mindset, entrepreneurial spirit, and a lifestyle founded on technologically based wealth.

key takeaways

  • Silicon Valley, located in the South San Francisco Bay Area of California, is a global center of technological innovation.
  • Named after the main material in computer microprocessors, Silicon Valley is home to dozens of major technology, software, and internet companies.
  • Silicon Valley is one of the wealthiest regions in the world, and one of the hottest real estate markets.

Understanding Silicon Valley

Silicon Valley is located in a region of Northern California. Although its boundaries are somewhat nebulous, they generally include all of Santa Clara and San Mateo counties, the western edge of Alameda County, and Scotts Valley in Santa Cruz County.

Centered in the Santa Clara Valley, the region's population is over three million, and its 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.

Some 39 Fortune 1000 companies are headquartered in Silicon Valley. Most of them are hardware or software companies—Cisco Systems, Intel, Oracle, Nvidia—but the list also includes giants in other fields, including Visa and Chevron—depending to some extent on how one defines Silicon Valley's boundaries. The number of high-profile ventures born in Silicon Valley has made the region an attractive target for venture capitalist firms and investors too.

Half the world’s tech billionaires live in Silicon Valley and it is currently one of the wealthiest regions in the world. In May 2012, The New York Times reported that 14% of households in Santa Clara County and neighboring San Mateo County earn more than $200,000 per year. In 2015, the Brookings Institution ranked San Jose third in the world in per capita gross domestic product (GDP), behind Zurich, Switzerland, and Oslo, Norway. By 2019, The Guardian reported the region was posting $128,308 per capita in annual GDP, with an annual output of $275 billion, according to the Bureau of Economic Analysis (BEA).

$139,755

The average annual earnings of a Silicon Valley household in 2019, according to the Silicon Valley Institute for Regional Studies

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 (HP) company.
  • 1940: William Shockley invents a silicon 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 Fairchild, Lockheed, and Xerox.
  • 1956: William Shockley opens his own firm, Shockley Semiconductor Labs, in Mountain View, Calif.
  • 1957: Several Shockley employees resign and start a competing firm, Fairchild Semiconductor. These men will later go on to start many other companies, including Intel and Nvidia.
  • 1958-1960: Independently, Robert Noyce and Jack Kilby 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, which is used in all microprocessors today.
  • 1961: Former Fairchild backer Arthur Rock establishes Davis & Rock, which is 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.
  • 1971-1972: 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, and PayPal are founded.
  • 2000-2010s: Facebook, Twitter, Netflix, and Uber are founded.