While Micron Technology dazzled Utah with jobs and tax money last year, Utah County quietly set a record.
With little fanfare, 19 new technology companies sprouted in the county - the busiest year ever for high-tech startups.Utah was transfixed by prospects of Micron's $2.5 billion plant and its instantaneous transformation of northern Utah County. The Boise company pledged 3,500 jobs and tax revenue in the tens of millions.
Then in February Micron placed completion of the plant on hold indefinitely. Some of those new startups are likely to bear profits long before Micron ever makes a single memory chip in Lehi.
Economic development leaders seem nonplused about Micron now.
They suddenly remember two truisms of economic development. When it comes to technology companies, the best bet is to grow your own businesses. And, while all industries have cycles, the technology sector spins much faster and more wildly.
This is an industry that thrives on such principles as Moore's Law, coined by Gordon Moore, a godfather of Silicon Valley. It holds that about every 18 months the speed and power of microprocessors, at the heart of computer technology, doubles.
"The metabolic rate of this business is about the same as a hummingbird," said Jamie Lewis, a former Novell employee and principal of the Burton Group in Salt Lake City.
Technological gold
There's gold in technology companies, and so we covet them. They pay high wages, require highly educated employees and don't muck up the environment. Money seems to sprout as easily as grass seed.
So when a technology company announces it needs a new place to grow, states clamor for their attention. For one thing, it's a fairly rare opportunity. Once planted, technology companies tend to stay put.
Richard Bradford, executive director of the Utah Valley Economic Development Association, learned that lesson 10 years ago after he flew to San Jose to scout technology companies he might lure to Utah Valley. Upon flying home, he reached this conclusion: None of the companies he looked at were likely to move.
"States can spend fortunes, but it's wasted money. Unless a company decides there is something they don't like about an area they are in, there is no incentive to move," said Jan Crispin of the Bureau of Business and Labor Statistics.
Sometimes it happens, though: A company opts to expand or exist elsewhere. They often want enticements - which Utah communities are increasingly reluctant to give.
"When Intel was looking a few years ago, New Mexico almost gave them the state to locate there," said DeLance Squire, executive director of the Commission for Economic Development in Orem. "It's a mistake to make such a huge commitment because if the ownership remains out of state the decisions are made in such a way that local interests are frequently ignored."
Signetics, he said, is a good example of that. The company closed an integrated circuit plant in Orem after deciding to consolidate operations at its U.S. headquarters in New Mexico.
Micron makes the case as well. While the company is delaying its expansion into Utah because of a dreary chip market, it is moving forward with expansion of its Boise operation.
Educational edge
Some economic development directors believe Utah communities should rely on their attributes to trigger high-tech prospecting. The quality of an educational system is often a key ingredient in a successful bid for a business, they say.
Micron, for instance, wanted to locate near a steady supply of highly trained engineers. No college or university in Idaho has an engineering program.
Westin Hotels and Resorts decided this month to place its new technology center in Utah after studying 40 potential sites largely because of availability of technological expertise at the University of Utah and a highly skilled local work force.
A crop of well-educated potential employees has drawn technology companies to other states as well:
Proximity to a university played a factor in Taiwan Semiconductor Manufacturing Co.'s decision to select Camas, Wash., as the site of a new $1.2 billion chip plant last week.
A highly educated work force anchored by the University of Texas was a factor in Samsung's decision in February to located a billion-dollar chip plant in Austin, Texas.
"The most important ingredient they (technology companies) need is skilled and competent people," said Peter Genereaux, executive director of the Utah Information Technologies Association.
But given that technology companies tend not to move - remember how Ziff- Davis toyed with moving its computer publishing
operation to Utah and then stayed in New York? - there is a more important reason that a good educational system matters.
It's what drives creation of new startup companies with potential to become the next high-tech wunderkind. And home-grown companies promise all the same rewards and much more loyalty.
WordPerfect and Evans & Sutherland are two examples of high-tech business pollinated in local universities. Strong educational institutions are "one-third of the environment we need to create to have a fertile garden of high-tech firms," Bradford said.
Home grown
Squire believes support for com
panies striving to take root right here is the second key. "My strongest feeling is we ought to develop our own companies and take care of them as well as we possibly can, giving them every bit of assistance we can," he said.
Orem started a revolving loan fund for just that purpose. Squire figures the fund has loaned $5.6 million out to new or expanding companies, mostly within the past two years.
A survey of those startups taken a year ago found they employ more than 750 people and have combined revenues of $10 million to $15 million.
David Coursey, editor of PC Letter, ticks opff a list of Utah born and bred companies. Six of the state's top 10 technology companies started right here (see accompanying chart).
"There are a number of companies that you think of today as having substantial operations in Utah that started there," he said. "I would rather see BYU do a better job at incubating other companies than trying to get another Intel plant," adding the Utah Valley is better off without Micron. "The big successes have been home-grown companies."
State of flux
The high-technology industry that has grown up around the personal computer is still a youngster.
Consider: In 1965 science was abuzz about the ability to reproduce electronic circuits on chips. Hand-held calculators equipped with a single chip arrived in the mid-1970s. The personal computer made its debut just 15 years ago - about the same time companies began installing voice mail systems. A science fiction writer coined the term "cyberspace" in 1984; "information highway" was added to the language in 1989.
Thirty-eight percent of the companies listed in the Utah Information Technologies Association directory started Utah operations between 1990 and 1995. Bradford says that about 80 percent of Utah County's high-tech companies have changed names or products in the past year.
This industry may never reach maturity because it exists in a state of constant reinvention. Its life cycles are dramatic and volatile. Communities that want to go for silicon gold need to understand that.
"I think our industry has a higher quotient of risk than other industries do," Genereaux said. "That's why the rewards are higher than others."
Micron has been the object lesson in the vagaries of the technology sector of late. The dynamic random access memory chips it sells have taken a deep tumble in price.
While Micron doesn't talk about its numbers, a report just issued by UBS Securities explains the situation clearly. Given past cyclical declines in chip prices - which typically drop about 85 percent within a year once free fall starts - the firm expects 4 megabyte DRAM chips to sell for less than $4 by summer. That's down from $13 last summer.
Bradford said Micron freely distributed its annual reports when it first came on scouting tours in Utah Valley. Those numbers showed that Micron had weathered tough times before and hinted it would likely do so again.
"Many of us memorized those annual reports," he said. "We were very aware of the nature of the industry - also from our experience with Signetics."
Micron spokesman Kipp Bedard said the company tried to be upfront about the busts as well as booms of the chip industry.
Apprising people "who haven't been in the business, or haven't been involved in high tech before is sometimes frustrating for us," Bedard said. "You hope everyone is familiar with the business, but obviously everyone is not."
Ups and downs
Lehi gets praise from many economic development and industry observers for minimizing its financial exposure with Micron.
"I don't know that they were so smart or more that they were just broke," said Crispin.
Some speculators though, particular those who bought up land near the plant, may get burned.
"Some people got angry with the corporation because they felt they weren't being good corporate citizens," Bradford said. "We need to realize corporations are not welfare industries, they're not community service corporations. They are profit-making entities that depend on markets and cash flow."
Downswings are not unique to Micron. Novell, WordPerfect, Iomega, Evans & Sutherland, Megahertz - many of Utah's biggest technology companies have experienced near-death experiences only to reinvent themselves and come back as contenders.
The fluxing of their work forces has led to many startup ventures economic development leaders say form Utah's silicon fields.
Communities that want to reap high-tech rewards have to be willing to take risks, to ride the roller coaster, in hopes of nurturing the next Microsoft or Netscape.
"There is volatility in every industry," Bradford said. "When Geneva Steel went down, Utah Power & Light had to lay off people. Whoever thought a utility company would have to lay people off? Nothing is guaranteed - except maybe the newspaper business."
*****
ADDITIONAL INFORMATION
Data bit:
Who are Utah's 1,700+ high-tech businesses?
28% Software developers
18% Professional services, such as hardware, software, telecommunications engineering, consulting
14% Manufacturer of a computer or telecommunications-related product or component
11% Sales offices, education/training, information system providers, manufacturer reps., maintenance services
10% Dealers or distributors
9% Value-added system resellers
6% Telecommunications services
4% Information services
*****
Utah technology: Top 10
NUMBER
RANK COMPANY OF EMPLOYEES 1995 UTAH REVENUES
1. Novell Inc. 4,100 $2 billion
2. US WEST Communications 3,200 $567.2 million
3. Franklin Quest Technology 2,200 $277 million
4. Iomega Corp. 1,584 $326.2 million
5. Loral Communications Systems 1,400 NA*
6. Packard Bell 1,300 NA*
7. Bourns Inc. Integrated Technology 950 NA*
8. Evans & Sutherland Computer Corp. 675 $113.2 million
9. Ameritech Library Services 650 NA
10. Unisys Corp. 610 NA
*Financial results for Utah unavailable or company is privately held.
*****
Who is Utah's technology worker?
- Most likely to be male.
- Makes average annual wage of $38,460 (1995) - 70 percent higher than the annual wage of public and private non-agricultural workers.
- Works for a company that makes software.
- The company is located in Salt Lake County and has existed for 10 years or less.
- The company employs fewer than 25 people.
Source: Utah Information Technologies Association