Silicon Valley may lose its edge, report warns

Silicon Valley may lose its edge, report warns

San Francisco: Silicon Valley’s economy is sputtering and risks permanently stalling, according to an annual report by a group of researchers in the region.

Part of the toll on Silicon Valley has resulted from the recession. The region, the center of the global technology industry, lost 90,000 jobs from the second quarter of 2008 to the second quarter of 2009. Unemployment is higher than national levels and the worst in the region since 2005, when technology companies were still recovering from the dot-com implosion.

The drop in the number of mid-level jobs—the engineers who drive much of the Valley’s growth—has been sharpest. And when companies do hire, they are cautiously hiring independent contractors instead of regular employees, and are hiring abroad, according to the “2010 Index of Silicon Valley" report, which was produced by the Joint Venture: Silicon Valley Network and the Silicon Valley Community Foundation, two local non-profit groups.

One of the Valley’s measures of success—akin to the size of bonuses on Wall Street or box-office sales in Hollywood—has been the number of patents received and the number of initial public offerings of stock in technology companies. Patent registrations dipped slightly in 2008, and initial public offerings have dropped to the lowest levels since the 1970s.

Venture capital financing of start-ups sank 37% from 2008 to 2009. And vacancies in commercial real estate jumped 33%. Even when the trauma of the financial crisis subsides, Silicon Valley will still be at risk because of deeper, long-term challenges, the report said.