The GBA has a similar division of roles. Guangzhou is the cultural, political and economic center of southern China. Hong Kong is a global financial center and “super-connector” between East and West. Shenzhen is China’s undisputed center of technology, innovation and entrepreneurship, with an outstanding private sector. Flanking Shenzhen are the manufacturing bases in neighboring Dongguan, Huizhou, Zhongshan and Jiangmen. Zhuhai has long held the title of the most livable city in China, while Macau is a tourism and leisure industry attraction.
Challenges to Silicon Valley’s success and potential lessons for the GBA
In spite of its success and free market economy, the Silicon Valley area, with dozens of independent transportation systems across more than 100 cities, lacks government planning and coordination. This has led to low facility utilization, resource overlap and inefficiency. In addition, the Valley now faces a plethora of other problems, leading to a hemorrhage of talents, businesses and business leaders, including to clusters in less hospitable climates such as Toronto. What have been Silicon Valley’s missteps?
Failure to retain key players
Silicon-Valley giants such as HP, Oracle, Cisco, Tesla or Google provide critical mass. Moreover, they develop disruptive technologies which often create entirely new industry sectors. Therefore, when Hewlett Packard Enterprise (HPE) revealed in December 2020 its decision to relocate its headquarters from Silicon Valley to Texas, the announcement sent shockwaves throughout the entire Valley community.
HP is just one example. The long list of companies that are planning to or have already left California also includes Uber, Airbnb, Salesforce, Yelp, Twitter and Pinterest.
This exodus might appear to have been precipitated by the Covid-19 pandemic, now almost three years running. As many Valley observers believe, however, the pandemic simply accelerated a trend that was already playing out. While the decisions to leave might vary and personal decisions come into play, the exodus has shed light on a handful of underlying problems: high costs, unaffordable housing, traffic congestion, high taxes, red tape and over-regulation, among others.
Among all metropolitan statistical areas in the US, the San Jose-Sunnyvale-Santa Clara area has the largest population of millionaires and billionaires per capita. This is largely a result of the wealth created in the tech business. Such affluence is partly to blame for escalating costs in the Valley. The median annual tech worker salary in Silicon Valley was about US$133,000 – the highest in the US. This has prompted some Valley companies to consider transferring part of their operations elsewhere, such as the Midwest or Sun Belt states.
The shortage of affordable housing in Silicon Valley is also severe: Year after year, the number of housing units built in the Valley fails to catch up with the demand and with the number of jobs created. The resulting shortage has driven home prices up, making them the most expensive in the US.
The pandemic has exacerbated the problem: As major tech firms announced long-term shifts to remote work, employees have been looking for more space for work and family. Although the housing market is beginning to level out, it remains the hottest in the US, with the median sale price for houses in the Bay Area standing at US$1.5 million. In choice locations such as Cupertino, Los Altos or Saratoga, it has exceeded US$4 million.
The opening of the Bay Area Rapid Transit (BART) system in 1972 was a game changer for Silicon Valley. Consider Fremont, which had been somewhat removed from the action in the Valley, but the BART connection with San Francisco and other cities has spurred the city’s growth. In 2010, Tesla purchased a factory owned by a GM-Toyota joint venture, remodeled and expanded it substantially. Employment in 2022 reached 22,000, almost doubling in the last two years. Many other companies such as Seagate, Lam Research and Cirrus Logic have also built and expanded factories, creating thousands of jobs every year.