Defense may reshape Silicon Valley, again

High-tech firms, slogging through dotcom slump, look once more to military demand.

In an effort to reinvent itself yet again, the capital of American innovation is turning to a page from its past.

Amid the foundering start-ups and nascent biotech firms that still define Silicon Valley, the long-forgotten defense industry is again resurgent - and not just because of the new war on terrorism. For months, contractors from aerospace giant Lockheed Martin to more modest operations have been hiring, offering a haven for workers tired of the dotcom roller coaster.

The new jobs certainly don't offset the losses elsewhere, but they suggest that the Pentagon could again become a more prominent player here, as the armies of the future rely as much on sensors and computer systems as on bullets and bombs. Moreover, they are an indicator that - like the Internet revolution and others before it - the next wave of Silicon Valley innovation might be significantly influenced by evolving military technology.

Especially after Sept. 11, experts say, America's new interest in homeland safety - with the possibility of high-tech ID cards and more surveillance - plays directly to the strengths of Silicon Valley's defense contractors.

"The Internet wave, the dotcom wave - they have sort of crested," says Doug Henton of Collaborative Economics in Mountain View, Calif. "Now, the defense industry comes in and says security, surveillance, and biometrics is the way to go" to deal with bioterrorism.

Mr. Henton, like every other economist here, acknowledges that guessing what Silicon Valley's next big thing will be is a highly speculative business that often proves pundits wrong. Nonetheless, most modern-day soothsayers attempting to read the current economy agree that, after a major decline due to defense cuts a decade ago, the Pentagon's role in the valley is likely to grow.

The evidence is already mounting. Even before Lockheed Martin won the contract last month to build the Air Force's next-generation fighter plane, it was hiring in the valley. One job fair last month drew 1,300 people looking to fill 290 new jobs.

Next big thing: data fusion

The reason is simple: Cutting-edge technology tops all the armed forces' wish lists. That means missiles that guide themselves to their targets by visual recognition, for example, or soldiers with wearable computers. Perhaps the greatest challenge is data fusion - the ability to take the reams of data that come in from sensors, satellites, and sentries throughout a region and fuse them into a common picture of the battlefield that provides all members of an army with what they need to know, when they need to know it.

It's an enormously complicated task that stretches current technology to its limits. But if America is to maintain military superiority, it's a crucial project.

"You have to do it," says Dan Goure of the Lexington Institute, a think tank in Arlington, Va. "The development of a common picture is to warfare of the 21st century what ... good maps were to the warfare of the 20th century."

For the first time, Mr. Goure says, technology is starting to be able to achieve this goal, "and the techniques, the science ... clearly comes out of Silicon Valley."

It always has. For decades, this fertile crescent of technological know-how set amid the grassy folds of California's coastal range has been the incubator for many of the defense industry's most advanced technologies. After World War II, the military turned to valley companies such as Lockheed,

Hewlett-Packard, and GTE Sylvania for everything from simulators to satellites, and the cash infusion laid the foundation for Silicon Valley as it is today.

The integrated circuit - which started the microchip revolution of the 1960s and '70s and gave Silicon Valley its name - was developed largely with Defense Department money. Indeed, finding commercial uses for products developed with government dollars is a recurring theme here. The Internet was also originally funded by the Pentagon.

For those reasons, some here believe that the new challenges to American security after Sept. 11 could spur a new round of spending and research - and therefore new technologies to fuel Silicon Valley's next wave. The time is certainly ripe, with the dotcom expansion of the late 1990s tailing off and people looking for the valley's next act.

Necessity and invention

"It's during a downturn that we see the most innovation," says Henton. "In an up time, everyone just copies each other."

John Burwell, for one, has already seen more interest in defense recently. His employer, Silicon Graphics, is known mainly for creating systems for digital animators in films ranging from "Pearl Harbor" to "Gladiator." But it also does big business in satellite technology and flight simulators that the Pentagon uses. "Recently we've seen some major upticks," says Mr. Burwell, director of global programs.

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