Hot Competition For High Tech

Dec. 21, 2004
Communities worldwide aspire to be the next Silicon Valley or Rte. 128 corridor.

Make the 30-mile trip from downtown Washington to Dulles International Airport and you come upon a curious sight. Once you get beyond the city's notorious Beltway and merge onto the Dulles Access Road, you enter what not long ago was bucolic northern Virginia countryside complete with grazing cows. Now it's a corridor of modernistic office buildings adorned with names of Internet-related, telecommunications, and other high-technology companies. One structure in particular grabs your attention-an arresting wedge of glass and steel shaped like a giant slab of pie balanced on its point. It is the home of Virginia's Center for Innovative Technology. And there, only scant yards away from this testament to the 21st century, is a vestige of the 19th -- an abandoned barn. The juxtaposition of the old and new symbolizes the rapid emergence of the Washington Metropolitan Statistical Area as a world-class center of high tech. Yes, Washington! The ultimate government town. Yet its MSA, which also includes a corridor of biotechnology and other high-tech firms along I-270 in suburban Maryland, by some counts now has more high-tech workers than federal employees. Want another surprise? Consider New York City, the mecca of finance, media, and entertainment. Yet the city's hottest new industry is high technology -- notably more than 4,000 software and systems-integration firms that have clustered in renovated factory buildings in the Flatiron District of Manhattan. The area, dubbed "Silicon Alley," is projected to be the home of more than 100,000 so-called new-media jobs this year. Washington and New York are not unique. Scores of other U.S. MSAs similarly are emerging as bustling centers of high tech. Until the last few years, only two communities truly could claim that designation: California's fabled Silicon Valley and the Rt. 128 corridor outside Boston. Nor is the trend limited to the U.S. Throughout the world, countless other communities are riding the high-tech wave. If New York City is a surprise, so must be Tokyo. Its Silicon Alley equivalent is "Bit Valley" -- a play on Shibuya, one of Tokyo's youngest, hippest towns, whose name stems from shibu (bitter) in Japanese. But the list includes a vast range of other locations: metropolises such as Hong Kong and Singapore, rural Scotland, the unlikely island of Sardinia, a site amid the olive groves of the French Riviera, and even third-world Costa Rica. Trading on the success of the Silicon Valley original, many of the communities have adopted the words "silicon," "valley," or a variation, in naming their centers. Keith Dawson, a Westford, Mass., marketing consultant, has listed no fewer than 89 such names, including: Automation Alley in Oakland County, Mich.; Billy Can Valley in Arnhem Land, Australia; Silicon Bayou in Lake Charles, La.; Silicon Bog in the Irish midlands and Silicon Fen in Cambridge, England; and Silicon Orchard in the Wenatchee Valley, Washington. At least 10 locations in the U.S. call themselves Silicon Prairie. "It all started with Silicon Valley," says Dawson, "and all the Silicon Something follow-ons had some relationship to making chips. But by 1996, calling yourself Silicon Something was just a shorthand way of saying 'We're a tech center, or want to be.'" Just what is a tech center? The definition has moved far beyond that of a location for chipmaking. Now the term also embraces telecommunications, information technology (IT), computer hardware and software, other electronics manufacturing, pharmaceuticals, and biotechnology. Few communities don't want to be a tech center. Explains Michaela Platzer, vice president of research for the American Electronics Assn., Washington: "High-tech companies are very desirable to have as part of your economic base. They're environmentally friendly, they bring in tax revenue, and they pay well -- more than $50,000 a year for the average high-tech worker. It's no wonder that [communities] are fighting tooth and nail to get them." Admits Lawrence Moretti, senior manager of Fantus Consulting, Princeton, N.J., a site-location consulting division of Deloitte & Touche LLP, "There's high tech stuff happening in so many places it's hard to keep track." New "hot" locations are rising so fast and receiving such heavy publicity, he observes, that they're "like a flavor of the month." Which communities truly belong in high tech's top tier? It depends on how you measure, and experts differ in their analysis. But a few are commonly cited. One is Silicon Valley itself. "There's nothing like it and never will be," comments Dawson. Even though it is the original high-tech location (the San Jose-Palo Alto, Calif., corridor) it must still be considered "emerging," Dawson contends, because of the way it is "reinventing itself." Chipmaking now accounts for less than a fourth of the Valley's high-tech jobs as PC manufacturing, computer software, Internet, and even biotechnology firms flock there. Similarly transformed is the Rt. 128 Corridor. Three of its original residents -- Wang, Digital Equipment, and Data General -- have disappeared. But more than offsetting their departure is a proliferation of software, communications, Internet, and biotechnology arrivals. Indeed, the entire state of Massachusetts is aggressively promoting itself as the "Dot Commonwealth." Consistently mentioned, too, is Austin. "It is significant because it is the first tech center that was not defense-driven," observes Douglas Henton, president of Collaborative Economics Inc., a Palo Alto economic-development consultant. "The original high-tech centers -- Silicon Valley and Rt. 128 -- were born out of work for the Defense Dept. Austin wasn't. It's a great model for other cities." In partnership with the University of Texas, Austin put itself on the high-tech map in the 1980s by recruiting two huge semiconductor consortia -- Microelectronics & Computer Technology Corp. and Sematech Inc. -- to compete with the Japanese. Subsequently the MSA has lured such hardware manufacturers as Dell Computer Corp., IBM Corp., and a host of spinoffs. "Austin is growing faster than any large metro area in high tech," indicates Ross DeVol, director of regional and demographic studies at Milken Institute, a Santa Monica, Calif., economic-research organization. Austin often is paired with Dallas, where high tech's presence is even bigger, as a Texas tandem. (Houston, too, is up-and-coming.) Big D's MSA got an early tech start as the home of Texas Instruments Inc. and Electronic Data Systems Inc. Lately, though, an influx of communications firms -- among them the headquarters of GTE Corp. and major facilities of Northern Telecom Ltd., L.M. Ericsson Telephone Co., Fujitsu Ltd., and Alcatel -- has prompted the name "Telecom Corridor" for the area. San Francisco gets frequent mention, separately from neighboring Silicon Valley. Although the city is big in biotech, its current tech happening is "Multimedia Gulch" in the South of Market Street (SOMA) district, where Internet start-up firms are congregating. Elsewhere in California, the San Diego MSA has diversified from its one-time defense base to become a telecommunications, software, and biotech powerhouse. And Los Angeles, home of a string of suburbs dubbed "The Digital Coast," has attracted a host of Internet-related start-ups to go with its traditional aerospace and defense core. Further north, a burgeoning high-tech sector is lessening the economic dependence of Seattle on Boeing Co. Giant Microsoft Inc. has been a farm system for newly rich entrepreneurs who have launched software and e-commerce start-ups. Also rapidly developing a tech presence is Seattle's rival to the south, Portland, which capitalizes on its quality-of-life reputation. In the East, Research Triangle, N.C. -- amid the university towns of Raleigh, Durham, and Chapel Hill -- long has been a pharmaceutical hub; now it is also awash in telecommunications, software, and biotech. Philadelphia has become a nucleus of information technology and pharmaceuticals. Pittsburgh is a robotics center. And don't forget Washington and New York. In the nation's capital, Thomas G. Morr, managing partner of the Greater Washington Initiative, an arm of the Board of Trade, acknowledges, "We're not a manufacturing city. We're a city of ideas." The Internet, he points out, was born in Washington -- at the Defense Dept. But the new driving force of the area's tech emergence is America Online Inc., headquartered near Dulles Airport. It is the seed of many of those companies that have sprouted along the Dulles Access Road, and the main reason that 70% of U.S. Internet traffic is channeled through Northern Virginia. Similarly, in New York, Charles Millard, former president of the New York City Economic Development Corp., credits an idea -- the invention of the graphic interface browser -- with launching that city's high-tech boom. "Anything related to media always has had a big home in New York," says Millard, now managing director, Internet Group, Prudential Securities, Inc. "But that [browser] had an explosive effect." Many other U.S. metro areas can legitimately claim to be in the high-tech elite. Among those frequently mentioned are Chicago (think Motorola Inc.); Salt Lake City; Atlanta; Minneapolis-St. Paul; Albuquerque; Boise, Idaho, and Boulder, Colo. But the competition for high-tech industries isn't limited to the U.S. In Europe, almost every nation is trying to build a technology presence. Nowhere is the effort stronger than in Ireland, where tech development -- aided by a low 10% corporate tax rate -- has spurred a Europe-leading economic growth rate of 8% annually. Activity is centered in the area around Dublin, where Hewlett-Packard Co., Intel Corp., Dell, and Xerox Corp. have sunk roots and are expanding. Another Celtic technology tiger is Scotland's Silicon Glen, a still largely rural area that stretches from Glasgow to Edinburgh. It produces 7% of the world's personal computers and 28% of those in Europe, as well as nearly 80% of the continent's workstations and 65% of its automated-teller machines. The area also is a biotech leader; Dolly, the cloned sheep, was born near Edinburgh. "Scotland is perceived as a land of good whiskey, good golf courses, and our not-always-friendly weather," says Jim Black, a spokesman for Agilent Technologies Inc. "That is a perception that clearly needs to be changed." Elsewhere in Europe, France and Germany each boast around 60 communities that are sites of high-technology parks. The flagship is Sophia Antipolis, a 30-year-old park near Nice on the French Riviera that bristles with IT firms. Another thriving French center is Nancy-Beaubois near Nancy, and hard by the borders of Germany, Belgium, and Luxembourg. In Germany, Stuttgart bills itself as "the undisputed No. 1 high-tech leader in Europe." Not only is it an automotive capital, but it also has a growing IT base, including new Eastman Kodak Co. and Sony Corp. facilities. In Spain, Malaga boasts an array of high-tech firms, recently enlarged with the arrival of Hughes Electronics Corp. In Italy, a lack of coordination among government, local communities, and industry has hindered high-tech development, indicates Milan-based analyst Gino Portiere. But one small city on the island of Sardinia, Cagliari, shows promise. "Give us another year or two and [we] will be a landmark for the industrial world," declares Giovanni Gessa, who heads a technology park there. Meanwhile, in Asia, just about every city is a Silicon Something. Although Tokyo's Bit Valley is the current hot spot, other centers already are established. One is Taiwan, which calls itself Technology Island; it's the world's third-largest manufacturer of IT products. Another is Penang, a former agricultural backwater off the coast of Malaysia that, like the capital city of Kuala Lumpur, is a magnet for international technology companies. In Hong Kong, the back streets of Wanchai, noted for night life, are a drawing card for Internet start-ups; the $1.7 billion Cyberport project on the site of the city's old airport also is attracting a rash of development. Singapore long has been regarded as a secure, stable tech location. In India, Bangalore has been going gangbusters, so much so that its infrastructure can't keep pace; other cities -- Hyderabad and more recently Madras -- are nipping at its heels. In China, both Beijing and Shanghai have been striving to create a high-tech industry; now Shenzen is joining them. Back in the Western Hemisphere, Canada is the scene of growing activity. Vancouver is home to an increasing number of energy, biotechnology, and IT firms, while Saskatoon is becoming a biotech cluster. The hottest action, though, is in Ottawa, one leg of the Toronto-Ottawa-Montreal triangle that Canadians call "Silicon Valley North." It's luring Silicon Valley companies, notes Gregory Rust, first secretary in the Canadian Embassy in Washington, "because of the favorable exchange rate of the Canadian dollar." In Latin America, the No. 1 high-tech nation-as it is in general manufacturing-is Brazil. Its Silicon Valley equivalent is the Campinas metro area near So Paulo, where Motorola, Compaq Computer Corp., and Lucent Technologies Inc. have located. Foreign firms also are pouring into Curitiba, attracted by its high quality of life. Uniquely, another tech hot spot is San Jose, Costa Rica, where a rising software industry is expected to do for the country what coffee and bananas have done for two centuries: place it on the world trade map. Free-trade agreements with several nations, investment incentives, skilled labor, and proximity to the U.S. have led to the creation of many local software firms and the arrival of an Intel Corp. facility. All these communities, and countless others, are wrestling with the question: What does it take to become an elite high-tech location? At least four ingredients are required: an educated workforce and strong educational facilities (almost every tech center is a university town); a positive business climate; availability of venture capital; and a solid transportation and communications infrastructure. Although many MSAs possess one or more of these components, few have them all, observes James A. Schriner, director of location strategies at Fantus Consulting and an IW contributing editor. "They're high-tech wanna-bes." And that describes most communities: They want to be centers of high technology. At the dawn of the 21st century, they recognize, that's where the future lies. Contributing to this article were Tanya Clark, Tokyo; Jack Gee, Paris; Tom Mudd, Dublin; and Edvaldo Pereira Lima, So Paulo.

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