High-tech evolution: A victim of Apple Syndrome?

CIOL Bureau
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In more and more areas where digital technology has been introduced there

seems to be little room left for further dramatic improvement. That is perhaps

most evident in the chronic decline in the number of interesting new products

and technologies.


The high technology industry appears to have fallen into a state of decline,

similar to that experienced in pop and rock music in the 1980s and 1990s. From a

flood of creative rock and popular music tunes produced in the 1960s and '70s,

it seems the number of memorable sound tracks produced in the last 20 years can

be recorded on a single CD-ROM.

The same is true in terms of innovation in Silicon Valley. Exciting new

breakthrough products and technologies are few and far between these days. In

past years there was often not enough time to keep up with the seemingly endless

stream of product advances. Comdex is a classic example. The show was the launch

platform for thousands of new products each year, in the early and mid-1990s. In

the last two years, only a hand full of products worth writing about and which

had not been introduced in months prior to the show, were shown at Comdex.

In the years ahead, today's state-of-the-art technology, of course, will

continue to spread to a broader and broader segment of the world population and

turn more and more of these technological marvels into everyday commodities like

PCs and cell phones are today. And while each product sector will become more

refined, faster, more integrated, or smaller, there are no products on the

horizon that will change our lives in the way the personal computer, cell phone,

digital camera, the Internet and everything else digital available have today.


Valley in economic shock

During the past 40 years, Silicon Valley has never failed to come up with an
answer to the question, "What will they come up with next?" New

technology breakthroughs have been following one after the other in an amazing

display of human ingenuity. At least three or four times in the past 25 years,

as the local industry struggled through technology slumps, Silicon Valley has

been given up for dead by local experts. Each time they were dead wrong and the

Valley lived to see another explosion in global demand for its latest

technologies and products.

But Silicon Valley today is not the same. The fall of the revolution

and the fall-out that have helped to topple major industry sectors, including

networking, telecommunications, and semiconductors, have devastated much of the

Silicon Valley technology infrastructure.


Silicon Valley has been hurt by the current slump in ways and to a degree as

never seen before. In past boom-and-bust cycles, there was always a next

semiconductor, disk drive or personal computer boom right around the corner. The

downturn never lasted more than 18 months. And by the 12th month into a slump,

the signs of a new boom would become clearly visible, such as the growing

popularity of email and the Web in 1996 and 1997, sparking the biggest - and

probably the last big - boom in Silicon Valley.

Unlike past booms driven by new product types that have grown in to large

market segments today, the incredible expansion of the 1997-2000 era was fueled

mostly by wishful thinking, unworkable business plans and a greedy investment

community that was willing to fund almost anything that involved the Internet.

Today, nearly half of Silicon Valley has been wiped off the map, leaving

entire business parks modern-day ghost towns. Close to 40 million square feet of

commercial space is sitting vacant. More than 100,00 high-tech jobs have been

lost in the past 18 months and companies like HP, JDS and others are still

laying off masses of people in an effort to have a chance at a turnaround when

the economy starts to recover.


The economic crisis in the Valley has ripped apart its eco-system in which,

engineers get together over lunch, a drink or dinner and decide to quit their

jobs and start up a new company. Most of the valley's engineering community

basked in unimaginable wealth for a brief period in 1999 and 2000 as stock

options of even low-level managers became worth millions, if not tens of

millions of dollars. And because everyone was predicting the boom to last a

generation, many over-committed themselves financially. After their fortunes

were wiped out almost overnight, the engineers were left holding the bag filled

with expensive home loans, cars, income tax liabilities and other financial

bills that have driven thousands into bankruptcy.

The current downturn started on November 2, 2000 when America's political

system failed to produce a new president. The American society was literally put

into a 3-month "holding" pattern. And when President Bush finally took

the oath of office, the economy was on a downhill slide that continues even


The September 11 events drove a killer-stake through what was already a

recession-troubled economy. To this date, companies are so uncertain of the

economy's future, they dare not spend beyond bare minimum levels. With the US

economy back into heavy deficit spending, and a president focused more on

fighting terrorism than economic demise, the US government's abilities to pull

the country, and with it the rest of the global economy, out of the post-911

doldrums is increasingly compounded.


The biggest factor holding back a high-tech recovery, however, is that even

20 months into the downturn, there still is no sign of any new driving high-tech

product type or technology that will spark a new high-tech boom. Windows XP is

not going to turn the tech sectors around, and neither is a 3GHz microprocessor.

Cellular phones with integrated PDA and video capability are not likely to

become a hit anytime soon and more and more consumers are getting tired of

paying $50+ monthly cellular phone bills.

In the mean time, chances for entrepreneurs to strike it rich in Silicon

Valley are more and more limited due to fundamental changes in the industry

infrastructure. Many technology sectors are becoming commodity markets in which,

only a handful of giant global consumer electronics and IT enterprises do most

of the manufacturing and selling. Many aspiring technology companies will just

fall victim to the Apple Syndrome: consumers vote with their pocket books, not

their brains.

And venture capital is becoming scarce for the first time in more than 30

years. VC spending levels are less than half of what they were two years ago.

And the poor performance of the stock market is causing the VC pool to continue

to dry up.