The rapidly falling cost of building computer-based gadgets has touched off a wave of innovation that is starting to eclipse the software-driven world that came to dominate the Valley in the dot-com boom of the late 1990s.

“If we look hard over the last 10 or 15 years, people don’t realize how different the world is now compared to 1996,” said Sean O’Sullivan, a venture capitalist who splits his time between the United States, Ireland and China. “Products like the iPhone have driven down the cost of components. You can now easily make connected devices that transform lives in the way we have only been able to do with software before.”

To prove his point, Mr. O’Sullivan recently took teams from nine small start-up companies to Shenzhen, China, for 111 days in which each group developed and began manufacturing new products. He calls his investment firm, based in San Francisco, Haxlr8r (pronounced hak-CEL-erator), and in June the first group of fast-to-market hardware products was unveiled. The companies included Shaka, which makes a simple device for measuring wind for sailboard and kite surfers, and Kindara, maker of an iPhone accessory to help women determine when they are ovulating. (The system automatically generates a text message to the husband at the appropriate time.) There is also Bilibot, a project to build an inexpensive open-source robot.

THE shift away from the Valley’s obsession with dot-com services and Web-based social networks is a return to the region’s roots. The Valley began as a center for electronics hardware design in the late 1930s, when Bill Hewlett and David Packard built an audio oscillator that Walt Disney used in the production of the movie “Fantasia.” At the start of the 1970s, the label Silicon Valley was coined because of the proliferation of semiconductor companies. In the mid-1970s, a group of computer hardware hobbyists started the Homebrew Computer Club here, which gave rise to several dozen start-ups, including Apple Computer.