Fiscal Cliff Puts the Silicon back in Silicon Valley 

Amidst the flurry of budget negotiations, Silicon Valley is keeping an eye on lawmakers and the billions of dollars in funding that may be cut.

Despite being the technology capital of the world, touting icons such as Google, Apple, Facebook and Ebay, the valley is nervous. After outsourcing much of its manufacturing work to Asia, and beginning to do the same with design work, it is possible that the nucleus of American innovation will fall dormant.

But the looming Fiscal Cliff may provide a key opportunity to restore jobs from overseas and put the silicon back in Silicon Valley.

As T. J. Rodgers, chief executive of Cypress Semiconductor of San Jose, pointed out, the semiconductor fabrication plants for which the valley was named are currently in Taiwan. Without those jobs, thousands of blue-collar workers have added to poverty in Silicon Valley, but that's not the only problem that the outsourcing has caused. According to Harvard Business School Professors Gary Pisano and Willy Shih, innovation and competitive advantages are unforeseen casualties of manufacturing off-shoring.

Unfortunately, necessary supply chains are not in place to restore the valley to its manufacturing roots, but not all hope has been lost. AnnaLee Saxenian, dean of UC Berkeley's School of Information pointed to 3D printing and clean energy as future outlets for industry growth.

Regardless of which path Silicon Valley takes, January 1 will be pivotal in, as SFGate's Carolyn Lochhead put it, “righting the technology ship” as it teeters on the verge of keeling over. At that time, federal science funding could take a major hit, along with the tax code.

Despite lawmaker's difficulties in finding common ground across the aisle, both parties aim to end some tax breaks, which puts tax credit for research and development in danger.

But, according to Lochhead, “Sen. Dianne Feinstein, D-Calif., plans to introduce a new [tax break] for companies that manufacture high-tech products at home from their own patents, an idea that Rob Atkinson, president of the Information Technology and Innovation Foundation, a nonpartisan think tank, is pushing.”

Full story at SFGate