THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, September 3, 1995 TAG: 9509020360
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY MYLENE MANGALINDAN AND DAVE MAYFIELD, STAFF WRITERS
LENGTH: Long : 197 lines
Mark Clemons didn't fall out of his chair upon hearing that Motorola Inc. decided to locate a $3 billion semiconductor manufacturing plant in Virginia. But the news did startle the economic development director for the Portland Development Commission.
``Virginia hasn't previously been seen as a hot spot for this industry,'' said Clemons, who has helped make Oregon a national hub for semiconductor manufacturing. ``I guess I can say I was surprised it was Virginia.''
With the recent announcements of Motorola's semiconductor plant in Richmond and a joint IBM/Toshiba computer-chip factory in Manassas, politicians and technology gurus from around the nation are touting Mr. Jefferson's state as the next laboratory for one of the world's fastest-growing industries.
Virginia is on course to become the next silicon state. What remains unclear is how Hampton Roads fits in.
Scientists, engineers and economic development officials say Virginia's southeastern corner should be able to capitalize on high-tech companies' interest in the state. If Hampton Roads doesn't land its own Motorola or IBM/Toshiba, it should at least be able to attract some spinoff businesses and benefit from Virginia's new-found image as a ``Golden Crescent'' for high tech.
Among high-tech industries, few come close to matching semiconductors' explosive growth - which is why Virginia's recent success is so important. The tiny, thumbnail ``brains,'' or memory, are used in products ranging from computers to pagers to cellular phones to microwaves. The $101.8 billion market is projected to more than double into a $233 billion global industry in four years.
Industry analysts expect about 55 more computer-chip manufacturing plants to be built between now and the year 2000.
That means Virginia will have plenty more opportunities to add to its chip-plant roster, said Angelos Angeloucq, vice president for economic development at the Greater Austin (Texas) Chamber of Commerce.
``Your state was not picked because of its merits as a technology center, but out of the industry's necessity to create another region, another area of the country to handle the growth it's expecting,'' Angelou said.
Virginia's claim to two of the splashiest ``fab'' (industry speak for ``semiconductor fabrication plants'') announcements this year put it a notch above the competition. But it's still one level below other nationally recognized semiconductor centers: Austin; San Jose, Calif.; Portland, Ore.; Phoenix, Ariz.
To claim full membership with those other semiconductor meccas, the state needs to capture the more strategic industry jobs like circuit design, said Thomas C. MacAvoy, a professor at the University of Virginia's Darden Graduate School of Business Administration.
Educational support also will play a crucial role. The state must maintain or even increase support for university-based high-tech research, MacAvoy said.
By nabbing Motorola and IBM/Toshiba, academics and others say, Virginia is beginning to build the kind of infrastructure necessary to facilitate ``clustering'' - a concentration of companies that use computer chips and make chip parts that want to locate near the plant itself.
These world-class companies should attract the attention of other companies that may not have considered locating in Virginia. The recognition couldn't come at a more opportune time.
Other high-tech capitals are getting too crowded and too expensive for some. That explains why so many firms have been abandoning California for less expensive and crowded Western cities like Salt Lake City, Phoenix, Austin and Portland.
Much the same pattern seems to be emerging in the East.
``Research Triangle Park took off very well, but it's getting saturated. . difficult to operate in,'' said Robert J. Mattauch, chairman of the electrical engineering department at U.Va. and director of the university's Applied Electrophysics Laboratories.
Motorola chose the Richmond area largely because it was looking for new, low-cost turf with plenty of untapped, but qualified, workers. The same was somewhat true of IBM/Toshiba's choice of Northern Virginia, where the joint venture will employ 4,000.
Of the two, Richmond seems to be more important for Virginia and Hampton Roads, Austin's Angelou said. That's largely because Motorola spends a lot of money on research and development at its large plants, and invests heavily in training employees and upgrading their skills.
In Austin, Motorola is the city's largest private employer. It also dominates Phoenix, where its semiconductor manufacturing operation employs more than 17,000.
In both cases, the Schaumburg, Ill., company invested far more than it initially projected. The same thing will probably happen in Richmond too, Angelou predicted.
The company has said it plans to hire 5,000 for its Richmond plant.
``Wherever they have had a major presence over time, these cities have become major technology centers,'' Angelou said of Motorola. ``They are probably the most involved of all the semiconductor companies in the cities where they do business.''
The benefit to Hampton Roads and other Virginia communities may be in the spinoffs from a such a huge employer. As silicon-chip companies expand in a city, they attract suppliers, vendors and other companies that use the semiconductors in their products, like cellular phones or pagers.
Oregon specifically targeted supplier firms and electronic-product companies because the state wanted to encourage ``vertical integration,'' or companies involved in various phases of chip use and production.
Hampton Roads has already benefited from this clustering phenomenon on the Peninsula.
Canon Virginia Inc. employs about 1,200 people. But it's responsible - directly or indirectly - for another 1,800 jobs at about 20 companies that have followed it to Hampton Roads since the office-machines manufacturer set up shop in Newport News in 1986.
Like their state counterparts, Hampton Roads scientists, engineers, entrepreneurs and economic development officials realize the burden of responsibility rests squarely on them to create their own high-tech hub.
Hampton Roads already has a solid foundation of technology on which to build. It's rich with engineers and one of the world's largest and busiest ports. Many from outside the area readily acknowledge the resources already available in this region:
Two national laboratories: NASA-Langley, one of the foremost aeronautical-research centers in the country, and the Continuous Electron Beam Accelerator Facility, or CEBAF, one of the nation's most advanced physics laboratories.
The significant presence of the military, its sophisticated technology and its knowledgeable personnel.
A higher number of engineers per capita than many other large metropolitan areas.
A highly skilled, plentiful and affordable labor force.
A foundation of small- to medium-sized technology companies that either moved here or grew up here through technology transfer from NASA-related people or expertise.
Proximity to Richmond and Northern Virginia to take advantage of possible vendors or suppliers who want to locate near the two chip plants to cut down on transportation costs.
Despite these assets, few expect another Silicon Valley to burst on the local scene.
``Silicon Valley had it with the birth of the integrated circuit,'' said Doug Juanarena, president and CEO of Pressure Systems Inc., a company that produces sensing devices to measure pressure. ``Unless there's a fundamental technology invented here, you won't see an explosive growth. I think this area is going to evolve rather than explode.''
Many say Hampton Roads has been moving toward ``critical mass'' - an agglomeration of firms and people that encourages spinoff firms and new ventures.
A core of small- and medium-sized companies has sprung up on the Peninsula around former NASA engineers or people affiliated with Langley. They are responsible for starting companies like Pressure Systems Inc. and nView Corp., the Newport News company that makes viewing equipment for overhead slide projection.
New companies like Solarex Corp., a solar-panel manufacturer, and PCB Piezotronics Inc., which makes sensors used mainly in the automotive and aerospace test markets, are moving to the region.
Others like Lucas Control Systems Products on the Peninsula make controls for both the automotive and aircraft industry.
With federal cutbacks, Langley and CEBAF are making substantial efforts to encourage the transfer of technology from their research facilities to commercial use at companies interested in selling products using their data or techniques. That could spawn even more new ventures.
The Herndon-based Center for Innovative Technology and Old Dominion University's Entrepreneurial Center help fortify the high-tech movement by providing financial advice and technical support to upstarts.
Defense downsizing, largely viewed as an economic negative, may actually help Hampton Roads attract high-tech companies by making available displaced technicians and engineers. That's already happening.
Lou Dommer, vice president of PCB of Depew, N.Y., considered other sites in the state, North Carolina's Research Triangle, Florida and New York before deciding to build a sensor-manufacturing plant in Virginia Beach. The plant will employ up to 90 people within seven years. A large percentage of PCB's local hires will likely be ex-military people or former defense-contract employees, Dommer said.
His company already has a research partnership with NASA Langley to study the use of devices to control aircraft vibration. Potential spinoffs from that could make air conditioners and washing machines quieter. PCB is interested in developing a relationship with CEBAF, particularly to explore laser technologies and welding and joining techniques.
Image - or a lack of it - seems to be holding back Hampton Roads more than its ability to host high-tech industries, said Wolfgang Tolle, the Center for Innovative Technology's managing director for technology industry development. ``That image will only be created over time and with local leaders coming together in partnership,'' he said.
The same is true of the state. The more unified the front, the better the result.
``The thing that Virginia needs - that every region of the state is struggling with - is an identity,'' said Mark Warner, a Democratic candidate for the U.S. senate who made his fortune in telecommunications.
Portland recognized this early on. The Oregon city began focusing its long-term vision on technology investment and development more than 15 years ago. Research Triangle started 30 years ago.
``What's happening in Oregon is only the culmination of long years of planning and business-climate adjustment, and marketing and investments in education,'' said Clemons, the city's development director.
``A couple of plant locations doesn't make you a high-tech center,'' Clemons said. ``t takes a base of existing companies.''
``You need to have a plan. You need to have a strategy.'' ILLUSTRATION: Graphic
VIRGINIA'S GOLDEN CRESCENT
[For complete graphic, please see microfilm]
by CNB