From an interesting business history article in the San Francisco Chronicle:
"There is this myth that Silicon Valley was all orchards when the chip companies arrived, but it's not true. It had been building, building for a long time," said Christophe Lécuyer, a Stanford-trained historian who turned his dissertation into a book, "Making Silicon Valley."
Lécuyer, now an economic analyst with the University of California system, said the region's technological awakening began almost a century ago when, not long after the great quake of 1906, the Bay Area—and particularly the Peninsula—began innovating with the then-hot technology of radio.
"The San Francisco Bay Area was a natural place for interest in radio because it was a seagoing region," said Timothy Sturgeon, an industrial researcher at the Massachusetts Institute of Technology who described this radio period in a paper, "How Silicon Valley Came to Be."
Lécuyer and Sturgeon argue that, roughly 30 years before Hewlett and Packard started work in their garage, and almost 50 years before the Traitorous Eight created Fairchild, the basic culture of Silicon Valley was forming around radio: engineers who hung out in hobby clubs, brainstormed and borrowed equipment, spun new companies out of old ones, and established a meritocracy ruled by those who made electronic products cheaper, faster and better.
Not that all the energy was coming from the grassroots:
[T]he future Silicon Valley would find a powerful customer with deep pockets—the U.S. military.
Sturgeon said U.S. naval officials, impressed by Federal Telegraph's technology, gave the Palo Alto firm huge contracts during World War I—the first but not the last time war would fuel the region's tech firms.
In another hint of the future, Sturgeon writes that around 1910, Peter Jensen and Edwin Pridham quit Federal Telegraph "to start a research and development firm in a garage in Napa" to improve loudspeakers. In 1917, they formed Magnavox, which built public address systems for destroyers and battleships in World War I.
Advertisement: This is as good a time as any to plug my 2001 book Rebels on the Air: An Alternative History of Radio in America, which among other things looks at the complicated relationship between the military and the hobby radio community in the years around World War I. You can also turn there to read more about the early broadcaster Charles "Doc" Herrold, who has a bit role in the Chronicle piece. That's Rebels on the Air: an excellent stocking stuffer, if you have unusually large feet.