Measuring The Pulse Of The Industry
by Paul McGoldrick
You can track ticker prices all you like but they won't tell you the
real condition of the semiconductor industry, or at least my analog -- and
vaguely/quasi analog -- side of it. During a trip to Silicon Valley this
last week, for the pleasurable task of handing out analogZONE
Product of the Year Awards to local companies
-- it was interesting to look at the indicators that have changed little
over the years to get a pulse on how business is doing.
Traffic has always been a major indicator of the Valley's strength. During the duration of the dot-com madness all the roads were crowded, or at a stop. After my arrival there was one day when the major freeways were locked up (I don't know why) but the surface routes I always use moved cleanly, and there was no place any more than 15 minutes from anywhere else (except for one journey from South San José that I really screwed up). In earlier years that traffic would have been a major statement that things are not right…
Looking at building occupation levels the same message comes across. There are dozens and dozens of empty properties in some of the business parks. But when you look closer at those that are empty you realize that they are the older ones -- those put up for the defense contractor work of the 1950s within a couple of miles of Moffett/Ames (with strange, secure rooms in the middle of the buildings and even stranger basements…) and the really unpleasant buildings of the mid 1960s and early 1970s. The newer properties, including the recent custom-built company headquarters, all have their parking lots full.
The third major indicator, to me, are the restaurants. The lower-priced food establishments all looked like they were doing well. The higher-priced ones did not have the customers of yore. I had a reservation at the Lion and Compass, for example, but I certainly didn't need it. At 7 PM on a Thursday there were at least twenty empty tables, more if you consider the totally empty bar and function rooms. This establishment is a revered Sunnyvale landmark in Silicon Valley. Companies have been funded, bought, sold and let to wither over those tables -- but that wasn't happening the evening I was there.
The fourth external indicator to me is the price and availability of hotels. Prices of the places I stay at are still below 2001 levels and I was upgraded at my regular hotel. There were a reasonable number of parking places available during the week, showing the hotel was not empty (though certainly not full) but when I checked out on the Saturday morning my out-of-state car was the only one in the parking lot.
All of these indicators say that the industry has still not recovered. But is that true? When I visit the companies in my space it is quite clear that there is solid business going on. There are requisitions out for staff, where hiring managers are paying expenses for interviews; there are full parking lots and everyone is cheery and upbeat (and, I was glad to hear, making money from their pure analog Products of the Year). In forecasts I have heard of only one analog company predicting numbers lower than last year. (One of the best questions to ask a prospective CEO during interviews is, "have you ever been fired before?")
When you look at the external factors and the internal indicators it becomes obvious that there is something different happening at the moment. Things don't look the same as, say, 1999 (without the Millennium scares). And when you think about it it is obvious that they are never going to look that way again. We have, in 2005, an industry that is much more dependent on outsourcing than ever before. Many of the jobs that existed five years ago are never coming back to the Valley.
How does that make me feel? How does it make you feel?
The pragmatic part of me says that it is inevitable, that our ability to communicate over what were vast distances makes it shoe-in for the use of cheaper (but incredibly well-qualified) staff. It used to be that a US college attendee from a country like India would want to stay in the country after graduating; that is no longer as valid. Yes, we have a large number of ex-pats from the Far East (and Europe, especially Britain it seems in analog) but the number isn't increasing at the rate it was. People now want, more and more, to go home to help their own country.
The political animal in me, which I allow to escape on rare occasions, doesn't like it all -- and I would like it even less if I was the owner of office buildings in the Valley -- but it is not enough to overcome the pragmatism.
Silicon Valley, for all its good sides and all its invented hype, is
not going away any time soon. It is going to be a slightly different place
but there will still be flashing ticker prices in the corridors of the companies
that are "cool" and just logical about their business. And I,
and most people I talk to, certainly don't mind the easy drives…