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How did the market for semiconductors change between the early 1960s and the 1970s?

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Map of Silicon Valley with colored markers showing tech locations: blue historically important offices, green HQs, orange offices, and purple clusters across the Bay Area. — Silicon Valley Silicon Valley highlighting key historic tech offices, major tech headquarters, and offices with headquarters elsewhere.

Between the early 1960s and the 1970s, the semiconductor market in Silicon Valley underwent a fundamental shift in its primary customer base and financial structure.

Shift in Demand

In the early 1960s, the U.S. military was the dominant consumer of semiconductors, accounting for more than 50 percent of total sales. By 1972, however, military demand had plummeted to just 12 percent of the market. This decline was offset by the rapid growth of consumer and industrial applications, driven by technological advancements such as the invention of the microprocessor and the integrated circuit.12

Changes in Financing

The source of capital for the industry also transformed during this period. In the early years, the U.S. government provided significant funding through military research contracts. By the mid-1970s, venture capitalists had replaced the government as the primary source of financing for new start-ups. This transition supported a vibrant ecosystem where entrepreneurs could quickly establish firms, hire staff, and secure funding, further fueling the region's explosive growth in high-technology jobs.13