The Atlas of U.S. Manufacturing

Of the 10 highest-ranked MSAs on IndustryWeek's list of World-Class Communities, only two -- Chicago and Los Angeles-Long Beach -- aren't driven by high tech. The highest-ranked auto-dominated economy is No.14 Kokomo, Ind., (Detroit is 56th), while Lake Charles, La., at 19th is the top-ranked oil economy. High-tech industries are, indeed, the economic engine for a growing number of U.S. communities. IW's World-Class Communities rankings, in their fourth year, also reflect the importance of critical mass and the value of goods produced. The nine MSAs with the highest three-year increase in dollar value of their manufactured goods were ranked in the top 11 MSAs overall -- and each of those regions is strongly influenced by high-technology manufacturing. Just one MSA with fewer than 1 million jobs -- Austin-San Marcos at No. 7 -- cracked the top 10, and the highest-ranked MSA with a population under 1 million was No. 12 Wichita, which is benefiting from a resurgence in business-aircraft sales. How much has the high-tech sector changed the rankings? Only five MSAs -- San Jose; Elkhart-Goshen, Ind.; Lake Charles; Austin; and Kokomo (the smallest MSA in the top 25) -- have made the top 25 each year. "IT, high tech, and biotech regions have out-distanced auto and oil economies," says Edward W. Hill, professor of urban studies and public administration in the College of Urban Affairs at Cleveland State University. And he suggests the shift is permanent. "Heartland economies need to introduce new high-value products to move upward again." The rankings reflect four other trends:

High tech is quickly vaulting some regions -- such as Rochester, Minn.; Middlesex, Somerset, and Hunterdon counties, N.J.; Raleigh-Durham-Chapel Hill; Eugene-Springfield, Oreg; and Seattle-Bellevue-Everett -- into manufacturing prominence.

Economic swings in regions where high tech dominates don't appear to be as severe as those where industries such as defense, autos, aerospace, and oil predominate.

Areas that have rebuilt their manufacturing after downsizings in the '90s may have fewer jobs, but their more diverse manufacturing bases have made their economies stronger.

Even strong manufacturing economies are subject to inordinate swings when they're critically linked to a single employer or industry. Oil gluts push oil economies down and auto centers take a hit when vehicle sales drop or there are production disruptions from contract strikes or wildcat walkouts. For example, the high-tech sector that has grown up around Microsoft Corp. in the last two decades has "provided enough cushion" to keep the Seattle region (No. 53 this year, up from No. 182 in 1999) out of a recession when Boeing Co. goes into a downturn, says economist Richard Conway of Conway Pedersen Economics Inc., Seattle, publisher of the Puget Sound Economic Forecaster. "We are less dependent on Boeing than in the past." Yet, as he points out, Boeing "is still the biggest swing in our economy" because during slow times it provides 60,000 jobs, compared with nearly 90,000 jobs when the facilities are humming. That's 10,000 more jobs than the high-tech sector -- led by Microsoft with 14,000 - provides. Meanwhile, manufacturing employment in the Rochester, Minn., region -- which suffered during IBM Corp.'s restructuring in 1993 and 1994 -- is recovering as a contract-manufacturing sector emerges to serve a resurgent IBM. Precision electromechanical supplier Pemstar Inc., born out of the IBM downsizing, now employs 800 thanks to an expansion in 1998 that doubled its size. Rochester also gained 500 employees when Western Digital Corp. located its newly formed Enterprise Storage Group disk-drive manufacturing operation there five years ago and later added an R&D lab and new headquarters facility. In January, Toronto's Celestica Inc. purchased IBM's 700-employee Rochester electronic card assembly and test operations. "The strongest sector of growth in the U.S. has been the technology sector, and that is where we have our strengths," says Gary Smith, executive vice president, Rochester Area Economic Development Inc. Indeed, a study by the Milken Institute found that in 1998 Rochester had a higher percentage of its output from high tech (50.54%), than any other MSA. (San Jose was second at 37%.) That has pushed Rochester's growth rate the last three years, he says, to 3% to 5% compared with its previous rate of 1% to 1.5%. "As IBM outsources, it creates new reasons for business to locate here and hopefully expand beyond supplying IBM," says Smith, who knows all too well that over 80% of the region's manufacturing economy is tied to IBM and its contract manufacturers. "If there is a threat to our economy, it is that we are still dominated" by IBM and the renowned Mayo Clinic, he adds. Similarly, in Dutchess County, N.Y., where IBM is headquartered, manufacturing jobs are at their highest level since 1993. That has enabled the region, which is located halfway between Albany and New York City, to move up 116 spots to No. 51 on this year's list. In addition, the unemployment rate has declined by nearly 60% to about 3%. Yet even with job growth at IBM over the last four years, the region's 19,000 manufacturing jobs don't approach the 35,000 that existed before Big Blue's downsizing. Several high-tech manufacturers -- flat-panel screen manufacturer eMagin Corp. and medical equipment manufacturer Laerdal Medical Corp. among them -- have moved into the area. But only 1,200-employee MiCRUS, a six-year-old spinoff of IBM and Cirrus Logic Inc. that is now a wholly owned subsidiary of IBM, employs more than 400. "IBM's former research park hasn't filled up," says Ann Davis, director of the Bureau of Economic Research, Marist College, Poughkeepsie, N.Y. "We hear a lot of speeches about diversifying the manufacturing economy in the region, but it is hard sometimes for small companies to compete with IBM because IBM pays higher wages and can get the better people." The stories of many stabilized, rebuilt manufacturing economies -- Oakland, Los Angeles-Long Beach, and Orange County in California, and Boston-Worcester-Lawrence-Lowell-Brockton in Massachusetts -- are similar. As they've shifted to value-added manufacturing and reduced their dependence on a single industry or company, they've fashioned a manufacturing base that is more diverse, more global, and less regional. For example, in Boston, explains Jack Mello, senior vice president, First International Bank, "We have a new kind of economy with a lot of diversity." Companies looking for knowledge workers have moved in, and construction projects drive traditional manufacturing. "There are plans for new office buildings," says Mello, "and manufacturers -- particularly small ones -- feed off that, making door frames and glass for high rises. Yes, total manufacturing jobs have shrunk over the last 10 years. But our unemployment is the lowest it has been in 20 years." Likewise, Oakland has replaced traditional manufacturing "with new manufacturing and research capabilities," says Michael Teitz, director of research and senior fellow at the Public Policy Institute of California in San Francisco. Once a chemical and foundry center, Emeryville has become one of the leading biotech centers in the U.S. In addition, the southern part of East Bay has become a haven for electronics companies looking to exit the Santa Clara and San Mateo areas. "We have growth in computer services, software, and multimedia, and a lot of those new technology applications are moving into old-line manufacturing," adds Bruce Kern, executive director of the Economic Development Alliance for Business, Oakland. "Silicon Valley is no longer a location, but a state of mind with companies and people working across disciplines and fields, bringing networks together. Traditional manufacturing is integrating with growth sectors. The manufacturing economy here is now stronger." Indeed, Oakland began generating new jobs in the early 1990s when the Los Angeles-Long Beach area was still in the throes of a defense industry-induced recession. But that region, too, has revitalized its economy by changing its manufacturing base. Before a minuscule decline in 1999 -- manufacturing employment dropped by 3,000 jobs due to a loss of apparel jobs to Mexico and a shortage of industrial space -- the region had experienced steady manufacturing job growth since 1993. But even with that slight dip, the region, as of September, still provided the most manufacturing jobs in the U.S. -- 667,800, just ahead of the 660,000 in the Chicago MSA. "The region survived because most of its knowledge workers stayed," says Rohit Shukla, president and CEO, Los Angeles Regional Technology Alliance. "We now have a diverse base of industries that has been growing, even with the problems in Asia and Latin America." The region, for example, has leveraged the communication expertise from defense industries into the design and manufacturing of communication satellites. "Many of the major companies are not huge," says Shukla, "but that is the story of the '90s. Market value is no longer related to head count. Companies with small staffs can deliver huge value to a region." There are two other low-key economic powers in the region. One is the south-central sector of Los Angeles, where more people work in manufacturing than in Indianapolis. Another is the region's population of Koreans, Thai, Cambodians, Russians, Vietnamese, Japanese, and Mexicans who have "[created] a group of specialty food manufacturers that have been able to expand their businesses nationally," says Shukla. For more than a decade, San Jose, Austin, Houston, Dallas, Phoenix-Mesa, and Albuquerque -- all among the top 15 MSAs in IW's rankings -- have been the beneficiaries of high-tech growth, thanks to firms such as Dell Computer Corp, Intel Corp., and Compaq Computer Corp., which have pulled in a critical mass in electronics, computers, telecommunications, and semiconductors. But as the high-tech economic explosion continues, it's pushing even more MSAs -- such as Eugene-Springfield, Middlesex-Somerset-Hunterdon, Raleigh-Durham-Chapel Hill, and Portland-Vancouver -- to world-class manufacturing status. In just four years, for example, Portland has skyrocketed from No. 95 in IW's rankings to gold-medalist status. How? Nearly $14 billion in semiconductor investments from 1994 to 1996 has made it the third-largest producer in the U.S. That has triggered, says Joseph Cortright, economist with Impresa Inc., Portland, "the creation of new spinoff industries in display technology, in electronic design automation, and in semiconductor equipment. "Our critical advantage is that clustering," which has created a high-tech job base almost as large as in Seattle, Portland's neighbor to the north, says Cortright. "High tech is now the biggest industry in the region by job, by payroll, and by exports." Portland's high-tech diversity enabled it to weather, with minimal disruptions, the Asian-induced slowdown in the economy in 1998 and the first half of 1999. "Now, once again, everyone is hiring and booked to capacity," says Cortright. Ranked No. 52 four years ago, Raleigh is now No. 18 on the World-Class Communities list. "If you look at the technology sectors where the U.S. is a world leader -- information technology, life sciences, and software development -- we are strong in all three," says Ken Atkins, senior vice president, economic development, Greater Raleigh Chamber of Commerce. IBM, with 13,000 employees, provides the most manufacturing jobs. But Research Triangle Park, with more than 130 firms employing over 40,000, is now ringed by more than 20 other industrial, office, and research parks. The region has a solid base in biotechnology, pharmaceuticals, and telecommunications. Trying to capitalize on the region's voice and data technology expertise the Raleigh area also has seen "growth in the value-added engineering and the knowledge components of manufacturing," says Atkins. "A lot of the seeds planted in the last five years are beginning to produce results." Cisco Systems Inc., for example, has grown from 13 employees to more than 1,000 since 1995. And last summer Lucent Technologies Inc. moved 500 people in research and development and systems development for optical switching into leased space on the Centennial Campus "technopolis" of North Carolina State University. There, Lucent is building a 125,000-sq-ft facility for its optical-switching technology operations. Another high-tech hotbed is the New Jersey wealth belt in Middlesex, Somerset, and Hunterdon counties, where per-capita income is 29% higher than the U.S. average. It is also the medicine cabinet of the U.S. because of its concentration of pharmaceutical companies. New Jersey has more scientists per capita than any other state and ranks fourth in scientists as a percentage of the workforce. "When you have a cluster like that and a pool of talent like that, it is a big advantage in obtaining other companies of the same kind," says James Hughes, dean, Bloustein School of Public Planning and Policy at Rutgers University. Situated halfway between New York and Philadelphia, the region "reflects the new IT economy," says Hughes. "The manufacturing jobs that remain are higher-paying ones that require greater knowledge skills. Our output is growing. The economy is much better off because of the change." The Eugene, Oreg., area also is drawing an increasing number of high-tech companies. Using federal dollars from the Northwest Economic Adjustment Initiative, it persuaded Sony Corp. to build a compact-disc manufacturing plant in 1994 that now employs 400. Subsequently, Hyundai Semiconductor America opened a silicon-wafer manufacturing plant with 800 employees in West Eugene that has spawned a nearby high-tech industrial park. In addition, in the last 10 years Eugene has become the second largest center -- after Elkhart, Ind. -- for recreational-vehicle manufacturing in the U.S. The reason: Manufacturers saw a need to move production closer to what a development agency executive calls "investment-enriched retirees looking for luxurious RVs." Indeed, Monaco Coach Corp., with 2,000 workers, is now the region's largest employer. It has relocated its corporate headquarters from Elkhart to Coburg, Oreg. "At this point in time, we have a good mix with RVs, high-tech, electronics, and the forest-products industry," says Bob Warren of the Oregon Economic & Community Development Dept. But that dependence has shrunk. The forest-products sector accounts for just 30% of manufacturing jobs, compared with 75% a decade ago. And companies have diversified into home-remodeling products. Yet when it comes to manufacturing diversity, sixth-ranked Chicago remains king. No one sector provides more than 14.5% of the region's 660,000 manufacturing jobs, and 11 different industries provide at least 3%. The top four -- electronics, industrial machinery, fabricated metals, and printing and publishing -- account for less than half of the jobs. "This diversity helps insulate the economy from periodic economic swings and provides opportunities for technology application in a wide range of industries," says Virginia Carlson, research director, the Chicago Partnership for Economic Development. The Top 25

San Jose, Calif. Even a slowdown in the job-growth rate the last two years can't diminish the strength of the nation's top manufacturing economy, where the number of jobs is 30% higher than seven years ago. The high productivity of Silicon Valley workers (up 6% annually in the 1990s) has kept wage increases near 5% the last five years. That's 50% higher than the national average. Leading the way: software, with an average wage of $95,800. Major industries: electronics, semiconductors, computer software.
Houston, Tex. More than 160 companies have opened, expanded, or relocated manufacturing operations in the region the last three years. Many of them want to be near the Port of Houston, which ranked first in the U.S. in foreign tonnage for 1998. Oil still is half the region's economy. But nearly 40% of the net gain in jobs the last decade is computer-related -- from Compaq Computer Corp. and its cadre of suppliers. Major industries: petrochemicals, oil and gas, industrial machinery and equipment.
Portland, Oreg. More than half of Intel Corp.'s U.S. patents the last five years have been awarded to researchers in Oregon -- most of them in Portland, which has emerged as an important manufacturing and design center for semiconductors. High-tech jobs are up 65% since 1990 as electronics employment has grown about 8% annually -- three times faster than the national average. It's also a leader in flat-screen display technology and design-automation software. Major industries: electronics, high tech, primary and secondary metals, paper and wood.
Dallas, Tex. In the last seven years, manufacturing jobs in Dallas never have grown less than 4.6% -- with an average growth rate of 7%. Its 230,000 high-tech jobs rank third best in the U.S. after San Jose and Boston. In 1999, the Milken Institute ranked Dallas the second-best U.S. technology center (after San Jose). "Dallas exceeds Austin's [electronics] production by over 20% in terms of value of output," says the Milken report. Major industries: telecommunications, electronics, industrial machinery.
Boston, Mass. Boston has the second-highest concentration of high-tech jobs in the U.S. But its growth in telecommunications, computer hardware, and instrumentation hasn't kept pace with the nation's ever since a high-tech free fall eliminated 40,000 jobs between 1988 and 1993. Its future: the growing biotech sector and a rapidly expanding computer software sector -- second to San Jose in both the number of companies and jobs. Major industries: telecommunications, medical devices, software.
Chicago, Ill. Exactly how many workers it takes to make the 4.6 billion Oreo cookies produced annually in Nabisco Biscuit Co.'s cookie and bakery plant is not known. But almost one of every six food-processing employees in the U.S. works in the Chicago area. It's the second-biggest -- and most diverse -- manufacturing complex in the U.S. Still 30% of manufacturing jobs in rubber, metals, machinery, electronics, and instruments are tied to the auto industry. Major industries: industrial machines, fabricated metals, electronics, food processing.
Austin, Tex. Even with Asian problems impacting semiconductor demand, Austin's manufacturing jobs increased by 7.4% in 1998. Credit Dell Computer Corp., which has grown from 10,000 to 20,000 employees in three years and has a $5 billion impact on the area's economy. In the last decade, only Portland has added more semiconductor jobs than Austin, whose semiconductor sector has had a 17% compound growth rate for the last 30 years. Major industries: electronics, semiconductors, computer software.
Los Angeles, Calif. The apparel and textile sector still provides one-sixth of all manufacturing jobs in the region despite the movement of some "cut-and-sew" jobs from Los Angeles to Mexico in the last two years. But what's caused the rebound in U.S. manufacturing's largest job machine has been the growth of new industries -- commercial satellite dishes, metal fabricating for audioanimatronic figures, digital video discs, and specialty foods. Major industries: apparel, textiles, metals, food.
Phoenix-Mesa, Ariz. Semiconductors - and the high-tech segment of aerospace -- have turned Phoenix into a veritable job machine. Greater Phoenix has averaged 54,000 new jobs since 1990, most of them in high tech. It's now the nation's second-biggest semiconductor sector. That's created a wealth of innovation. The number of patents granted Greater Phoenix has increased by 141% since 1990 -- more than twice the nation's increase during the same time frame. Major industries: high-tech electronics, aerospace, biotech, software.
Atlanta, Ga. Since 1985, the number of manufacturing establishments in Atlanta has increased by 50%. More importantly, manufacturing -- which accounts for just 4.6% of Atlanta companies -- provided 11.4% of the region's jobs in 1997. High-tech firms account for 10% of all jobs and are projected to grow between 8% and 12% the next five years. Computer World rates Atlanta the No. 3 information-technology job market in the U.S. Major industries: high tech, aerospace.
Oakland, Calif. Credit Oakland's resurgence -- and change in manufacturing from traditional to value-added sectors -- to its close proximity to the Silicon Valley. The East Bay has become the migratory landing spot for electronics and instrumentation companies looking for lower land costs, more housing availability, and skilled labor. The shift has created a strong biotechnology center in Emeryville. Major industries: international trade, agriculture and food processing, biomedical, environmental engineering.
Wichita, Kans. With 70% of the general aviation aircraft in the U.S. built in Wichita, the region rides up and down on its fortunes. Right now it's soaring, with manufacturing jobs up 26.3% in the last five years. What's behind the boom? Corporate profitability, an increase in fractional jet-ownership programs patterned after the time-share concept, and a 1994 federal law that established an 18-year limit on lawsuits claiming product defects in private planes. Major industry: general aviation.
Philadelphia, Pa. Customers drew SAP AG to the City of Brotherly Love, and that's just part of greater Philadelphia's story. When the German software maker entered the U.S. market, its first manufacturing customers were in Delaware and other spots on the East Coast, so SAP chose to locate at a business center in Philadelphia's airport. It later moved to a city suburb, where it joins a growing number of technology, pharmaceutical, and chemical leaders including Unisys. Major industries: chemicals, pharmaceuticals, precision manufacturing.
Kokomo, Ind. The automotive industry continues to dominate the Kokomo manufacturing landscape, with two companies -- DaimlerChrysler AG and Delphi Delco Electronics Systems -- employing more than 16,000 members of the area's labor force and increasing their employment levels. Efforts also are under way to diversify Kokomo's manufacturing base. A recently completed labor market analysis lists workers' skills needed by manufacturers and includes a wage survey of secondary manufacturing companies. The next step in attracting new business to Kokomo: targeting industries that are projected to grow. Major industries: autos, auto components.
Albuquerque, N. Mex. A 1999 study identified Albuquerque as having the fastest-growing high-technology economy in the country during the 1990s, largely attributable to its concentration of electronic components and accessories manufacturers. While Albuquerque suffered in 1998 when the semiconductor industry was buffeted by the Asian financial crisis, new technology jobs flowing into the area have helped to lessen the sting. The attractions of Albuquerque for industry are many, including a wealth of research-and-development facilities like Sandia National Laboratories, an emphasis on job-training programs to ensure well-trained workforces, and an attractive climate. Major industries: semiconductors, optics, research and development.
Orange County, Calif. Orange County's most famous attraction may be Disneyland, but the region boasts a diverse and extensive manufacturing base that includes Boeing Co. (with more than 10,000 employees) and Toshiba Corp. Less costly than Silicon Valley, Orange County's location south of Los Angeles offers easy access to well-developed global transportation networks, a vast labor force, and Mexico. It also attracts businesses seeking to locate near their Pacific Rim partners. Major industries: aerospace, medical devices, computer hardware.
Lexington, Ky. Manufacturing is a vibrant contributor to the economy of a region more readily identified with agribusiness and horses. Indeed, Lexington's manufacturing sector grew by more than 13% between 1995 and 1998, fueled by manufacturers such as Lexmark International Group Inc., which has its headquarters here, and Toyota Motor Manufacturing Kentucky Inc., which employs more than 7,000 workers. The region wields its geographic location and well-developed roadways as a lure to business, noting that Greater Lexington is within an overnight drive of 70% of the U.S. market. Major industries: automotive, computer printers, health care, air-conditioning equipment.
Raleigh-Durham-Chapel Hill, N.C. Tobacco and textiles have made way for high technology in the Raleigh-Durham-Chapel Hill region. The attractions of Research Triangle Park, the largest planned R&D industrial park in the country, as well as three major research universities providing a highly educated workforce and partnering opportunities, have attracted the likes of IBM Corp., Glaxo Wellcome PLC, and Nortel Networks Corp. The community college system also helps the region offer a highly skilled workforce by providing businesses with customized training. Major industries: computers, pharmaceuticals, biotechnology.
Lake Charles, La. Depressed chemical prices in 1999 dampened Lake Charles' petrochemicals industry, which dominates the manufacturing landscape with 24 chemical plants and 10 refineries. However, several major investments may foretell improving fortunes for the region. They include a $187.3 million expansion project under way at Conoco Inc.'s oil refinery, as well as two separate projects to construct power-generation facilities. The state offers a variety of incentives to promote job creation and business expansion. Major industries: chemicals, refining, aerospace.
Minneapolis-St. Paul, Minn. The departure of Honeywell Inc. (and about 1,100 jobs) late last year hasn't really affected the economy; many employees were absorbed by area companies short of qualified workers. A diverse manufacturing base is keeping the economy strong. 3M Co. remains one of the major manufacturers in the area, along with Cargill Inc., International Multifoods Corp., and Medtronic Inc., which just recently expanded and is expecting to double its workforce to 8,000 jobs in the next few years. Major industries: electronics, medical instruments.
New York, N.Y. The area has seen a shift toward smaller, specialized manufacturing plants serving niche markets. Many plants are immigrant owned and are helping to revitalize small-scale manufacturing activities throughout the area. Understanding the importance, New York provides valuable manufacturing hubs such as the Greenpoint Manufacturing and Design Center, a 360,000-sq-ft complex that provides workshop space to small firms. New media, Silicon Alley, and motion pictures are fueling the growth as well. Also adding to the manufacturing melting pot are large firms such as Pfizer Inc. and Philip Morris Cos. Inc. Major industries: printing and publishing, apparel and other textile products.
St. Louis, Mo. Recognized as an entrepreneurial hub by the U.S. Small Business Administration, St. Louis is defending its manufacturing stance by becoming a center for agricultural biotechnology. Monsanto Co.'s agricultural headquarters and Life Science Research Center, which serve to find ways to improve agriculture through biotechnology and genetic engineering, are based in St. Louis. The area also is hoping for a defense-sector coup: Boeing Co. is vying for a $300 billion Joint Strike Fighter military contract that would provide thousands of manufacturing jobs. Other manufacturers include Anheuser-Busch Cos. Inc., Emerson Electric Co., and Ralston Purina Co. Major industries: aerospace, auto, chemical, biotechnology.
Indianapolis, Ind. Often referred to as the Crossroads of America -- it is intersected by five interstate highways -- Indianapolis is within a day's drive of half the U.S.' population. Eli Lilly & Co., Rolls-Royce PLC's Allison Div., and Logo Athletic take advantage of the area's location by calling Indianapolis home. Plans to build a 210-acre high-tech office park and manufacturing training programs are ways the area is sustaining manufacturing growth. Major industries: pharmaceuticals, automotive.
Cleveland, Ohio Ten IW 1000 companies call Cleveland home. The heavy hitters include Goodyear Tire & Rubber Co., TRW Inc., Eaton Corp., LTV Corp., Sherwin-Williams Co., and Parker Hannifin Corp. Nine major U.S. and six Canadian markets are located within 500 miles of Cleveland. The metro area is a diversified durable goods manufacturing community with just under 230,000 people employed in manufacturing in 1997. The metro area completed 34 manufacturing projects in 1999, creating 1,259 new jobs and attracting investments of $205 million. Major industries: steel and allied products, plastics and chemicals, autos.
Elkhart-Goshen, Ind. Elkhart enjoys one of the highest manufacturing employment rates in the U.S. Nearly 44% of the area's workforce is employed in a diversity of sectors that includes recreation vehicles. In fact, RV manufacturing and sales were at a two-decade high in the first half of 1999. Industrial redevelopment is a major activity, and manufacturers expanding their facilities include Coachmen Industries Inc., which just opened a 92,500-sq-ft plant. Major industries: recreation vehicles, band instruments, pharmaceuticals, lumber, manufactured homes.