August 29, 2007 – A large portion of semiconductor manufacturing may have shifted to Asia, but Silicon Valley still holds a surprisingly strong position in the industry thanks to its diverse ecosystem of participants — and minus behemoth Intel it’s well outpacing the rest of the industry’s growth, according to data from iSuppli Corp.

Silicon Valley’s 56 semiconductor suppliers achieved 5.8% growth in 2006 to $68.2 billion, lagging behind the 9.6% average worldwide chip sales growth. Nearly half of those sales were from Intel — but minus Intel the collective growth of the other 55 chip firms was 26.4%, to $36.7B, the analyst firm pointed out.

iSuppli says about 25% of global semiconductor companies are headquartered in Silicon Valley, and about 26% of global chip revenue comes from there, with 39 of the 56 companies generating >$100M in annual sales. Taiwan’s Hsinchu region is the only other one that comes close in terms of dollars, with $50.2B, but it’s heavily focused on foundry manufacturing and not diversity.

“Silicon Valley chipmakers serve virtually every major application market in the global electronics industry,” said iSuppli VP Dale Ford, in the report. He noted that the computer industry saturates the region (think Intel, AMD, nVidia, etc.), but there are plenty of chip firms working in the fields of consumer electronics, wired communications, and industrial segments, which are also among the top major markets for chips. That wide range of markets becomes particularly diverse if you take Intel out of the equation.

That diversity bodes well for all chip players in the region, iSuppli claims, because it can continue to attract engineers and other workers from a range of businesses and industries, such as energy and biomedical. The downside: there’s still not much exposure to mobile communications or the automotive industry.

While chip firms may choose to put their HQs (with management and senior engineers) in Silicon Valley, they’re moving most of their other operations elsewhere in the US or, increasingly, overseas, iSuppli notes. Still, the Valley remains a hotbed for semiconductor startups, and a lot of “basic innovation” still goes on here — e.g. emerging memory technology is being developed in the region, though actual manufacturing is shifted overseas to Korea, Taiwan, and Japan.

Top 10 semiconductor suppliers, HQ in Silicon Valley
(Revenue in US $M)

Worldwide……Company…………….2006 revenues……..vs. 2005 (%)…………% of total
2006 rank……(2005 Silicon
…………………. Valley rank)