Silicon Valley is the reason.
That's the same reason that Austin, TX (also home to some of IBM, etc's major engineering workforce), and Seattle, WA (Microsoft, and now a legion of other companies) are also hotspots for game development.
People don't like to move -- particularly experienced (i.e. valuable) engineers and artists who have set down roots (i.e. family). You *could* start a dev studio anywhere, but convincing experienced devs to move to that location, for your startup, would be... tricky, at best. You'd probably have to offer them more money than they are paid in the high cost-of-living area they are already living in.
Also, take into consideration that senior engineers, artists, etc. are also looking ahead to stuff like retirement, even if its 20+ years down the road. Living in a high cost-of-living area has natural advantages when it comes to 401K investments, etc. You make money in the big city when you're young, and then move to the low cost-of-living area to spend all the money you saved, when you're old. 10% of 100K per year is 67% more retirement savings than 10% of 60K per year.
There are a few acclaimed studios in lower cost-of-living areas in the US, but they're pretty rare (Raven, in Madison, WI, is a good example -- but they *do* of the University of Wisconsin to draw from, at least, and their engineering school is very very good).
