Silicon Valley No Longer Reflects Name After Investors Shun Chip Companies

Silicon Valley has lost its appetite for silicon. While venture capitalists are pouring money into social networking, e-commerce and online-game companies, investments in chipmakers are close to a 12-year low. And yet semiconductors -- made from silicon wafers -- provide the brains for everything from computers and mobile phones to nuclear missiles.

At issue is the expense to get a startup off the ground. Chipmakers spend millions developing and testing their designs before they even know if an idea is viable. Those costs have pushed the industry abroad to countries that offer tax incentives and subsidies unmatched in the U.S. Meanwhile, the expense of starting software and Internet companies has actually gone down, thanks to cheap Web-based programs and services. That contrasts with China, whose role as a manufacturing hub for semiconductors is helping it play a bigger role in design and innovation. The country’s worldwide share of chip- related patents is expected to rise to 33 percent this year from 22 percent last year.