Don't blame the feds if Silicon Valley falls behind

Why should the U.S. government bankroll the Valley's design-here, manufacture-there model?

Published September 11, 2009 5:09PM (EDT)

Silicon Valley fears being overtaken by the rest of the world in the race to dominate "green energy," reports Reuters' Laura Isensee from the Reuters Global Climate and Alternative Energy Summit, held in San Francisco this week.

But how much of the terror is real, and how much of it is a negotiating tactic aimed at getting government largess rained down on Valley start-ups? And what to make of one whopping internal contradiction illustrated, but not explored, in the article?

First we have this:

Areas such as India, China and the Middle East are betting on the sector while in the United States, the industry is still struggling from a dearth of financing because of the credit crisis and waiting for more action from Washington on federal policies for renewable energy ... For the United States to really play in the cleantech game, more federal money is needed for research, development and demonstration projects, said Google's Weihl, noting $10 billion to $30 billion a year would be a sustainable budget.

But then, we conclude with this:

"I like to say there's no place in the planet that you can get an idea and turn it into money faster than Silicon Valley," said Tom Werner, chief executive of SunPower.

Werner said the model that has evolved is that ideas and great companies come from Silicon Valley but are manufactured elsewhere. "I think that model can thrive," Werner added.

In other words: design the hot new thin-film photovoltaic panel in Palo Alto, but manufacture it in Taiwan. The canonical example of that model would be the semiconductor chip industry. With the significant exception of Intel, the predominant Valley model for decades has been to send nearly all manufacturing overseas. The Valley is dotted with venture-capital-funded chip design start-ups whose business model depends on outsourcing every possible process, including, sometimes, design.

But why exactly would it be in the interest of the federal government to bankroll that particular model? The Obama administration obviously wants to boost American green energy muscle, but it has also made it pretty clear that one of its goals in doing so is to create "green jobs." One reason why Silicon Valley companies are having trouble landing federal loan guarantees or direct grants could be the strings attached to the funding requiring manufacturing to be in the U.S.

That isn't the Silicon Valley way. Sure, the model may indeed continue to thrive, but don't blame the federal government if it doesn't. And consider this: Would China and India be as well positioned to take the lead in new green technologies, if Silicon Valley hadn't opened the door for them?

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

MORE FROM Andrew Leonard

Related Topics ------------------------------------------

Energy Environment How The World Works Silicon Valley