Case Study

San Diego's Technology Sector

Prepared by Frontier Catalyst | March 2026

EXECUTIVE SUMMARY

San Diego's technology sector is in a generational transition, international in every dimension. Qualcomm built the model: design chip IP here, license it globally, capture the design margin. The next chapter is being written now. Apple built its first cellular modem chip in Rancho Bernardo. Kneron runs a semiconductor supply chain from San Diego through Taiwan to Saudi Arabia. ASML (sole manufacturer of the most critical machine in global semiconductor production) maintains one of its largest North American engineering operations here, reinforced by the City's 2022 trade mission to the Netherlands.

San Diego already designs the chips, builds the autonomous systems, and hosts the engineers. The question is whether the region builds the institutional infrastructure to lead the allied-nation technology supply chain, or remains one node among many.

SAN DIEGO'S TECHNOLOGY ECOSYSTEM IN TRANSITION

San Diego's technology sector employs approximately 76,060 professionals (#17 nationally)¹ across more than 4,230 establishments, including 3,100+ software companies and 100+ research institutions. Startups raised a record $5.7 billion in venture capital in 2024,² led by defense technology and edge AI as the fastest-growing sub-sectors by deal size.

The sector's international character is structural, not incidental:

The growth trajectory reflects a composition shift: Q4 2025 showed overall SD employment up 1.4 percent year-over-year while professional and business services declined 2.3 percent. Defense technology and edge AI, not conventional software, are the growth poles. The sector is reorienting toward applications where physical security, supply chain integrity, and advanced manufacturing matter as much as software design.

The Defense-Technology Convergence: San Diego's Structural Differentiator

The clearest strategic argument for San Diego's technology sector is also the least often stated, the defense AI cluster and the semiconductor cluster are the same cluster. Shield AI's Hivemind autonomous pilot requires the class of edge inference that companies like Kneron are building NPUs to deliver. ASML's EUV machines produce the chips in Qualcomm's 5G modems, and in the guidance systems of next-generation autonomous military platforms. Apple's Rancho Bernardo semiconductor team draws from the same talent base as General Atomics and Kratos.

This convergence reflects San Diego's historical position at the intersection of military and commercial technology, built over decades through the naval bases, defense primes, and university research programs that feed both sectors. Name one other US city with all five: the dominant manufacturer of military-grade autonomous aircraft (General Atomics), the sole manufacturer of the EUV lithography machines that enable the most advanced chips (ASML), a hypersonic testbed operator (Kratos), an AI-pilot startup with an office in a war zone (Shield AI), and one of the world's most valuable companies building its first chip in-house (Apple). There isn't one.

The City's international engagement function can make this convergence legible to allied-nation governments making investment decisions across both sectors. When South Korea's trade ministry considers where to place a defense AI partnership, it is the same city where Samsung works on advanced semiconductor packaging. When Australia's defence procurement officials evaluate AUKUS technology partners, ASML's engineers are developing next-generation EUV optics down the road. The convergence argument is one no individual company can make for itself.

What the City cannot yet do is make this argument systematically, with stakeholder maps, FDI attribution, and a published strategy that makes the convergence thesis an institutional commitment rather than a talking point. See the Defense Technology case study for the defense cluster depth this sector context directly enables.

The four companies below illustrate the convergence from different entry points, consumer semiconductor independence, edge AI for allied nations, critical equipment manufacturing, and the globally integrated foundation beneath all of it.

APPLE: BUILDING SEMICONDUCTOR INDEPENDENCE IN NORTH COUNTY

The Strategic Bet

In July 2022, Apple purchased the seven-building Rancho Vista Corporate Center (67 acres, 800,000 square feet, formerly a Hewlett-Packard facility) in Rancho Bernardo for $445 million. Its first commercial real estate purchase in San Diego, made with a single declared purpose, wireless chip and modem engineering, sited deliberately in Qualcomm's talent backyard.

This was not a satellite campus. It was the physical infrastructure of Apple's most consequential long-term technology bet, ending its dependence on Qualcomm for cellular modem chips, in the same city where Qualcomm built its dominance.

Apple's San Diego workforce is estimated at approximately 2,000, the core modem and wireless team that developed the C1, drawn from Qualcomm's talent pool and UCSD's graduate programs. In January 2024, Apple relocated 121 Siri and AI roles to Austin while explicitly retaining modem engineering in San Diego. The distinction matters: this is not a general technology office. It is Apple's semiconductor independence infrastructure, and it stayed when other functions moved.

The International Dimension

The City's role is not to manage Apple's supply chain: it is to ensure the ecosystem around Apple (the UCSD talent pipeline, the testing companies that cluster around a chip design hub, the allied-nation investment interest drawn to Apple's engineering proximity) flows to San Diego rather than competing locations.¹⁰

KNERON: SAN DIEGO IN THE GLOBAL AI SUPPLY CHAIN

The Company

Kneron is among the most internationally networked technology startups in San Diego, and the most instructive proof that the sector is becoming a design node in a genuinely global semiconductor supply chain, not just a royalty-collection economy.

Kneron develops neural processing units (NPUs), chips designed to run AI inference at the edge, locally on a device rather than in the cloud. Its KL1140 chip (November 2025) is the first NPU capable of running full Mamba large language model networks at the edge. Total funding: $226 million, with $300 million additional sought at approximately $1 billion valuation as of October 2024, pursuing a Nasdaq listing via SPAC.

The Supply Chain: From San Diego to the World

Kneron's supply chain is the most internationally integrated of any San Diego semiconductor company:

Five countries, three continents, design anchor in San Diego.

The Geopolitical Positioning

Kneron's Riyadh subsidiary deserves particular attention.

The US has tightened export controls on advanced semiconductor technology to China across multiple rounds (2022, 2023, 2024). The GCC countries (Saudi Arabia, UAE, Qatar) are investing heavily in domestic technology capability as an alternative to Chinese dependence, competing for access to US-allied chip design expertise. Kneron's Saudi subsidiary is a bet that the Gulf becomes a significant market for US-allied edge AI chips as the technology bifurcation deepens.

This is strategic positioning most San Diego companies have not yet executed, reading the geopolitical landscape and building company structure to benefit from it.

The City's relationships with allied-nation technology ministries can accelerate this. The Philippine trade delegations, French research agreements, and South Korean Samsung relationship all build infrastructure through which a company like Kneron extends its reach.

The Defense Angle

Edge AI chips have direct defense applications: autonomous systems, sensor fusion, battlefield communications, counter-drone detection. Kneron's technology is inherently dual-use. As San Diego's defense AI cluster (Shield AI, HavocAI) grows, Kneron's NPUs become relevant to defense architectures, a commercial-defense intersection the City's engagement infrastructure is positioned to facilitate.¹¹

ASML: THE ALLIED-NATION SEMICONDUCTOR CHOKEPOINT, IN SAN DIEGO

Why ASML Matters More Than Its Name Recognition Suggests

ASML is Dutch, not a San Diego company in the way Apple or Kneron are. But it maintains one of its largest North American engineering operations here. ASML acquired Rancho-Bernardo-based Cymer for $3.7 billion in May 2013; that acquisition established the San Diego operating center at 17075 Thornmint Court. By 2017 the SD operation had grown 24.5 percent in headcount to 1,210 employees and occupied more than 566,000 square feet across multiple buildings. By mid-2022 the workforce had reached approximately 1,500, with another 10 to 15 percent growth planned that year.⁶ ASML occupies the most strategically irreplaceable position in the global semiconductor supply chain.

ASML is the sole manufacturer of extreme ultraviolet (EUV) lithography machines, the equipment that patterns circuits on semiconductor wafers at the most advanced nodes (7nm, 5nm, 3nm, 2nm and below). No EUV machine, no advanced chip. No advanced chip, no iPhone, no AI training at scale, no 5G modem, no hypersonic guidance system. Every advanced chip manufacturer (TSMC, Samsung, Intel) depends on ASML.

There is no second source. Three decades of development, an estimated $9 billion in cost before commercial production. No competitor has replicated it. ASML is the chokepoint of the global semiconductor supply chain.

The San Diego Presence

ASML's San Diego operations are anchored at the former Cymer headquarters at 17075 Thornmint Court in Rancho Bernardo. Cymer continues to operate as an independent business unit within ASML, focused on deep-ultraviolet (DUV) light source development, manufacturing, and service. The Thornmint Court factory designs and manufactures the EUV droplet generator: the proprietary subassembly that creates the 13.5-nanometer light at the heart of every EUV machine ASML ships, each priced in the hundreds of millions of dollars. The component is third-generation, robust, San Diego-built, and irreplaceable.

The Mayor Gloria trade mission to the Netherlands in September 2022 met an institutional commitment that was already nine years deep. The mission produced three documented outcomes relevant to San Diego's technology sector by the end of 2024:

• TNO (Dutch government applied science organization) opened its first North American office in San Diego
• San Diego International Airport launched a nonstop Amsterdam route generating an estimated $30 million in annual economic benefit
• ASML signed a long-term lease on 55,227 square feet at Via Del Campo Court II in Rancho Bernardo (move-in August 2024), the first speculatively constructed office building in the area in more than a decade

The first two outcomes are directly attributable to relationship time spent in 2022.⁷ The third is concrete in a different way: a private commercial developer broke ground on speculation in early 2023, betting that the structural commitment running underneath the trade mission would absorb new space. The bet paid out about a year and a half later when ASML moved in.

Read the full case study: Thriving Cities Deepened the Partnership →

The Allied-Nation Semiconductor Supply Chain

The political economy of advanced semiconductors is being reshaped at a pace that makes most other technology transitions look slow. Key developments since 2022:

San Diego sits at the intersection: Qualcomm and Apple design chips here; TSMC and Samsung (both with SD R&D operations) fabricate them; ASML makes the machines that make fabrication possible. When the allied-nation semiconductor coalition meets (in Washington, The Hague, Tokyo, Seoul) the economic activity they are protecting has significant San Diego content.

The Trade Mission Attribution

The Netherlands mission is the most documented example of municipal international engagement producing technology sector outcomes in San Diego's recent history. The outcomes (TNO's first North American office, the Amsterdam nonstop ($30M annual economic benefit), ASML's sponsorship and Veldhoven delegation hosting) are sourced by WTCSD and confirmed by City press releases.

This is the model: a City-led trade mission creates the relationship occasion, produces measurable outcomes, deepens institutional commitments, and compounds through supply chain integration and talent attraction. The Amsterdam nonstop alone ($30 million per year from a single air route) is a measurable return on municipal international engagement.¹²

QUALCOMM: SCALE AND SECTOR RESILIENCE

Qualcomm is the foundation. Its $38.96 billion in FY2024 revenue¹⁸ (a company record) is proof that San Diego's knowledge-export model works at global scale. The entire semiconductor ecosystem in this case study exists in part because Qualcomm proved it could be done from here.

With approximately 75 percent of revenue from customers outside the United States,¹⁸ Qualcomm is one of the most globally integrated technology companies in the country. The sector around it (Apple's modem engineering, Kneron's edge AI chips, ASML's semiconductor equipment) has the depth and diversity to anchor San Diego's technology economy through geopolitical change. Each new entrant broadens the base beyond single-company dependency.

The trade missions, allied-nation ministry relationships, and airport connectivity investments documented in this case study serve Qualcomm's interests and the broader sector's simultaneously. The stronger the ecosystem around Qualcomm, the more resilient San Diego's technology economy becomes.

POLICY IMPLICATIONS FOR THE TECHNOLOGY SECTOR

The Argument Assembled

The companies arrived independently. The talent base they share is what holds them together.

Defense-technology convergence amplifies all four steps: San Diego's defense AI cluster needs the same advanced chips the commercial sector builds, creating dual-use demand that no purely commercial or purely defense city can match.

What the City Does in This Cluster

The technology cluster presents a different City role than defense. In defense, the value is relationship framing. In technology, the value is supply chain integration: ensuring San Diego is on the consideration list when allied-nation coordination creates investment opportunities.

The Counter-Argument, and the Response

"Apple, Qualcomm, and ASML are global companies that operate in San Diego for their own reasons. The City of San Diego played no role in their decisions and has no influence over their future investments."

The response is specific. The Netherlands mission (September 2022) produced documented outcomes: TNO's first North American office in San Diego, the Amsterdam nonstop ($30 million annual economic benefit), and ASML's sponsorship and Veldhoven delegation hosting. The first two are sourced by WTCSD and City press releases. The third reflects a deepened institutional relationship.

The deeper point: global companies already have a business rationale for San Diego before the trade mission happens. What the mission does is create the relationship occasion, raise commitment ambition, and ensure that when ASML chooses between expanding in San Diego, Dresden, or Hillsboro, the City is the active partner rather than a passive bystander.

GROWTH VECTORS AND RISK SIGNALS

Growth Vectors

Risk Signals

The technology sector's strength is its diversity: no single company or single market defines it. Three signals are worth monitoring:

WHAT OTHER CITIES HAVE DONE

Documented governance actions by peer technology regions. Not aspirational: specific programs with sourced outcomes.

Austin/Taylor, Texas

Phoenix/Chandler, Arizona

Dresden, Germany ("Silicon Saxony")

San Diego has no equivalent cluster association. A "Silicon San Diego" model, requiring no public subsidy and only convening authority, could aggregate cluster voice and represent the semiconductor and defense-tech ecosystem to state and federal policymakers.

BUILDING THE ENGAGEMENT FOUNDATION

The evidence above is built from public sources. What it cannot capture is the perspective of the people closest to these decisions, and the institutional knowledge that determines which models translate and which do not. The questions below are designed to start that conversation.

What the Research Establishes vs. What Remains Unknown

• The cluster is documented. How companies experience municipal government is not. Do technology companies perceive the City as a relevant partner, or is municipal government invisible to them?

• The convergence thesis is structural. Whether companies see it is untested. Do hiring managers at Shield AI, Kneron, ASML, and Apple actually experience the defense-commercial overlap? Do they recruit from the same UCSD programs?

• Peer cities invest. What SD companies would prioritize is unknown. Austin invested in incentives, Phoenix in infrastructure, Dresden in a cluster association. If San Diego had $50M for technology cluster development, what would companies say they need?

• The Netherlands mission worked. The next target is an open question. Japan (TSMC supply chain), Taiwan (fabrication partners), South Korea (Samsung deepening), Israel (defense-tech convergence): each has a rationale.

Stakeholder Questions

Priority Engagement Targets