174

Chapter 12 Silicon Forest F. E. Ian Hamilton Department of Geography London School of Economics and Political Science

The in Santa Clara Clackamas, Washington (in ) County, south of San Francisco, is well and Clark (in Washington) -- that make known and appropriately named given up the Portland-Vancouver metropolitan its focus on activities based on silicon­ area. Unfortunately the latest data on chip technology. On the other hand, hand are three years old - for March perhaps "Silicon Forest" sounds a 12, 1984. Furthermore, for reasons of rather grandiose title for the new in­ confidentiality about specific firms, dustrial and business service develop­ most Standard Industrial Classification ment in the Portland metropolitan area. (SIC) entries in this source do not give It suggests that the scale, diversity, and exact employment, only bands, such dynamics of the region's high tech are as a range of 2,500-4,999 employees in becoming sufficiently prominent to be SIC 367 in Washington county. This widely recognized at the national level. provides a crude estimate of high tech Of course, the adjective "silicon" has employment in the Portland area as be­ been hackneyed, devalued, even mis­ tween a minimum of 26,548 and a max­ construed by being permutated to de­ imum of 47,041 in the week including saibe so many other areas of the counhy, March 12, 1984 - figures albeit up on like Colorado's "Silicon Mountain" and those of 22,928 to 44,019 in the same ' "Silicon Prairie," and places abroad week in 1982. such as Canada's "Silicon Valley North" The second source is a survey of (Steed, 1986), central Scotland's "Silicon firms conducted in 1985 by the Portland Glen" or Japan's "Silicon Island" of Chamber of Commerce and the Tualatin Kyushu. Yet, in a time of slogans, Valley Economic Development Corpora­ cliches and shorthand, the adage "Silicon tion. This is certainly far more accurate, Forest" seems to be apt for the contem­ but may not be complete as it covers porary Portland scene as it captures the only 173 firms, while it is believed that imagination of the public, politicians, there are now more than 200 high tech professionals and entrepreneurs alike firms in Portland (Figure 12.1). The most and encapsulates a set of conditions striking specialization is in SIC 382, and forces with strong implications for measuring and control instruments, a the future . field dominated by , followed It is difficuIt to classify high tech by SIC 367, electronic components, a activities in the Portland area. For this very diversified production group, and reason the focus here is on firms. Two SIC 357, office, computing and accounting sources of information are used. The machinery. Of far lesser scale, but first comprises data from the U.S . perhaps not importance, are SICs 366, Bureau of Census' County Business Patterns 384, 361, and 737. covering the four counties -- Multnomah, From this information it is not un­ Silicon Forest 175

Table 12.1. A sample of 173 high tech firms in the Portland-Vancou ver region by SIC groups, 1985 (Tualatin Valley, 1985) .

No. of Size Employ­ SIC Firms <49 50-499 >500 ment 356 General industrial machinery 2 2 12 357 Office, computing machinery 21 16 4 2,166 361 Electric transmission equipment 3 2 651 362 Electric industrial apparatus 12 10 2 498 365 Radio and Television equipment 4 3 1 145 366 Communications equipment 20 15 5 970 367 Electronic components 31 24 5 2 5,930 369 Misc. electrical machinery 5 3 2 301 372 Aircraft and parts 4 4 40 381 Engineering, laboratory, 9 7 2 260 scientific instruments 382 Measuring and control 28 23 3 2 22,515 instruments 383 Optical instruments and lenses 3 3 40 384 Surgical, medical and dental 14 11 3 755 instruments 737 , data processing 17 14 3 652 service Total 173 137 31 5 34,934 reasonable to estimate that up to 40,000 - one of the lowest amongst all Ameri­ workers are employed in Portland's can SMSAs - most expansion must high tech today. This is equivalent to have occurred after 1980, considerably only one-tenth of the high tech work raising its U.S. rank. force in Silicon Valley (Saxenian, 1985). Second, changes in the population Although this seems to be a very small of high tech firms since 1976 lend sup­ proportion, the following points should port to the reality of this growth. The be borne in mind. Oregon Department of Economic De­ First, the U.S. Office of Technology velopment claims that the number of com­ Assessment (OTA) in 1984 calculated puter and firms alone in the that Portland's high tech employment State increased by 60 percent from 568 in 1976 was only half that figure to 910 between 1972 and 1984, making (19,214), placing it 26th amongst U.S. it one of the regions of fastest high SMSAs - albeit ahead of such centers tech growth in the entire country. as Austin, Texas, Miami, Florida, and Based on this, only California and the Raleigh-Durham, North Carolina, Massachusetts, the historic high tech but well behind Seattle, Washington (c. core areas, have more of these firms on 48(000). Since the report claims that a population ratio basis than Oregon ' Portland's 1976-80 high tech employ­ amongst the 50 states. New births, ment growth rate was only 18.3 percent spin-offs from existing firms, and in­ 176 Silicon Forest

movement of firms from outside Oregon (3,250) in Hillsboro; and Coe Manufac­ explain these increments. But much turing (150) in Tigard. All in all, about growth was localized in Portland 23,000 jobs are localized in this zone. which, according to the American Elec­ Other clusters are far less marked. tronics Association, now ranks 10th in Those worthy of note occur: in central the nation in the numbers of electronic and inner Portland, which with over and information-processing companies. 1,000 employees, still serves as an "in­ Third, until recently firms have cubator" for small firms but also con­ significantly expanded numbers of jobs. centrates several important computer For instance, by 1985, employment in software producers; and in the south­ Tektronix alone, the leading firm in eastern Milwaukie/Clackamas area Portland, exceeded 75 percent of the along highway U.S. 224 near the 1-205 OTA's 1976 total of high tech jobs for interchange (Figure 12.1). There, some the entire metropolitan area; and many medium-sized firms were joined in other firms had grown, too. 1986 by OECO (650 workers) which re­ Fourth, Portland-located firms have loca ted from inner southeast Portland achieved very significant U. S. and to what is believed to be the area's world market penetration in selected largest new electronics facility since high tech niches. This is particularly 1979. About 3,000 people work in high true of the "raw materials" end of the tech in this zone. Many small firms are production chain. Two-thirds of the scattered elsewhere, though medium­ non-communist world's entire silicon sized ones are sited near Portland 1nter­ wafer output for microchips is localized na tional Airport in the northeast. within 40 miles of downtown Portland. Wacker Siltronic (800) forms a major At the other end of the chain, Portland "outlier" along the Willamette River in firms are pre-eminent in final goods the northwest. Across the Columbia, such as measuring, controlling, and Vancouver, Washington, hosts a notable navigational instruments, array proces­ group of firms with about 3,000 sors, and computer-assisted design employees, the most prominent being (CAD) and computer-assisted engineering Shin- Etsu Handotai (SEH) America (CAE) equipment. (675), Hewlett-Packard (500), and a The location of high tech firms in branch of Tektronix. the Portland area is characterized by clusters (Figure 12.1). The dominant FACTORS IN THE RISE OF aggregation is on the west side along PORTLAND'S HIGH TECH INDUSTRY the Interstate Highways 1-5 and 1-217, Silicon Valley is loca ted near the site especially in Tigard and Beaverton, and in the Sunset Corridor in Beaverton, of the first electronics breakthrough -­ the invention in 1912 of the cyclotron, Hillsboro and Forest Grove along U. S. from which television, telecommunica- Route 26. Growth here has been the major phenomenon of the last decade. By far the largest firms (by employment) have located here on spacious sites: Tektronix (13,024 workers), (1,320), Electro Scientific Figure 12.1: Di stribution of high tech es­ tablishments in Portland Instruments (800) and metropolitan area (various (780) all near Beaverton; Corporation sources). t-.. t-......

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WASHINGTC* CO. ' YAMHIa: to.- - I ,-~ / H_­ .. ~J .. I',t ,.._/., ,{""!.-:.-;',, .~ ' -...... -..J--... HIGH TECHNOLOGY INDUSTRIES , ~.' - L,.:;-.,-p ..~,. \ < \ "­ \ • FIRWS WITH lESS THAN "9 \ E~PLO Y EES \ \. "~ • FIRWS WITH 50- 49g EMPLOYEES 01 • FIRWS WITH 600-2 499 E'*lOYEES ;j e FIRWS WITH MORE THAN 2500 Etr.FLOYEE S 178 Silicon Forest tions and were all developed. be linked to three major factors. By contrast, Portland's high tech origi­ New Market Opportunities nated only 40 years ago. Yet the seeds were sown in the 1930's. Then, Portland Local and regional had a lively radio club, a reflection, market opporhmities induced the develop­ perhaps, of the desire of Oregonians ment and adaptation of existing firms to reduce or overcome their relative iso­ and the birth of new ones. Often, these lation from the mainstreams of American forged linkages with the "staples": log­ life and economic change. If that club ging, paper making, wood manufacturing, introduced people to radio and electrical shipbuilding, aluminum, as well as technologies, then two other events -­ with salmon fishing, river and marine the building of the Bonneville hydro­ navigation. Opportunities changed, electric power station on the Columbia however, as postwar growth gave way in the 1930's and World War II -- had a in the 1970's to marked decline in pro­ profound effect bringing engineering duction and restructuring in these in­ into major prominence in the region's dustries, requiring Portland suppliers economic life. to search for new markets elsewhere Franklin D. Roosevelt had envisaged and to introduce new products. that Bonneville Dam, built with U. S. A classic case is Precision Castparts federal funds, would "transfonn Portland Corporation (PCC) (Portland) which, in into a City of whirring machinery." In the 1950's, began casting tougher metal fact, the dam created the pre-conditions, cutters to meet the needs of local chain in the shorter term, for the growth of saw manufacturers (like Omark) serving industries to serve America's Pacific war an expanding lumber industry. Gradually, effort and in the longer term for de­ by investing heavily in research and velopment of electro-metallurgical and development, applying a new ceramic electro-chemical industries. Being one shell process to forge larger castings, of the west coast's few deep water and by searching for customers outside ports, Portland shared significantly in the Pacific Northwest, PCC has diversified the massive expansion of military in­ into custom-made castings not made dustries located from Seattle to San elsewhere in the U.S. Today, it is the Diego, especially shipbuilding along nations' largest, and the world's second the Willamette and Columbia Rivers. largest, producer of high tech jet en­ Although this could hardly be consi­ gine castings, using titanium supplied dered "high tech," it stimulated the by the Oregon Metallurgical Corporation birth and development postwar of local of Albany, and catering to the makers firms to manufacture navigational devices of civilian and military aircraft and the and instruments. No less important for Space Shuttle. Although this is a link long-tenn economic growth and modern­ with a major West Coast high tech in­ ization in Portland, was the large influx dustry - Boeing in Seattle and Lockheed of workers from other states, often bring­ in Los Angeles - the link is indirect. ing new skills, the engagement of The castings are supplied to engine women in factory work, and the exposure manufacturers, General Electric and of average citizens to modern tech­ Pratt & Whitney, located elsewhere in nologies on sea and in the air. The the U.S. and from PCC's subsidiary emergence of high tech industrial de­ manufacturing facilities in England and velopment in Portland since 1945 can France to Rolls Royce in Europe. PCC Silicon Forest 179 is one of Portland's leading high tech especially entrepreneurship, have been firms, a multinational corporation, decisive in establishing and developing ranking by revenue, as the 12th largest innovative activities. Fortunately, the public company in Oregon. drive of locally-born and immigrant Hyster, another longstanding Portland entrepreneurs, who preferred to remain firm, has stimulated local entrep­ in Oregon, has combined with improve­ reneurs to design and manufacture ments in the riverport, airport, high­ new process equipment for its business ways and land management around activities. Although no longer producing Portland to launch substantial industrial hoisting equipment (the origin of "hyster") diversification. Experience individuals it recently opened a new research and gained in wartime industries often development unit in Troutdale (east of spawned engineering or electrical ex­ Portland) which makes extensive use, pertise, innova tion and entrepreneur­ for instance, of computer-aided design ship which in peacetime has proved (CAD) and computer-aided engineering itself capable of penetrating national (CAE) products developed and man­ and overseas markets with new pro­ ufactured by Mentor Graphics and ducts. These changes created the pre­ Metheus Corporation. conditions for the "take-off" in the A survey of other Portland area high 1970's and 1980's of the latest high tech firms shows similar market linkages technology industries. to Pacific Northwest "staples." For In 1947 two of these former Portland example, North American Controls Inc. radio club enthusiasts -- (Portland) makes electronically-controlled and Jack Murdock -- founded a firm saw milling machinery while Coe Man­ they called Tektronix. It started making ufacturing Co. (Tigard) specializes in the world's first synchronized laser measurement devices for plywood which Vollum had invented . Producing and sawmill equipment. Others include a wide range of electronic measuring, Accuray Corporation producing software testing and control devices and instru­ for the paper industry, Concept ments, Tektronix today has a payroll of Technologies which manufactures 13,024. Apart from the State it is Oregon's graphics laser printers for the printing largest employer. Besides stimulating industry (a significant local activity), development of other local finns to supply and Aquidata Corporation making elec­ it materials and components, Tektronix tronic measuring instruments for grain gave birth after 1970 to more than a farming and silos (important for ag­ dozen "spin-offs" to manufacture new riculture in the region). Pace Industries product lines (Figure 12 .2). (Beaverton) specializes in marine elec­ This type of development - the tronics and fish lures and Matthews "spin-off" - may add diversity but it Marine Systems Inc. makes ship-steering also frequently deepens local specializa­ equipment. Amav has recently diversified tion. The process of a new firm develop­ from marine navigation instruments ing from an existing one has become into aviation navigation systems, particularly frequent in the new high bought mainly by west coast based air­ technology of the past decade. One craft manufacturers. "spin-off" from Tektronix, Floating Point Systems (Beaverton), already the Local Entrepreneurship biggest U.S. maker of computer array The region's human resources, processors, is the area's third largest .... o00

~ -n . o ::l 'Tl ....o (1) ~ Silicon Forest 181 high tech firm, currently employing illustrates the speed with,which innova­ 1,320 workers. Two other Tektronix tion is occurring amongst new Portland spin-offs, Mentor Graphics and region spin-offs. It is claimed that this Metheus Corporation, together employ new product could fundamentally alter 450 workers. Although \:>oth these firms the way super computers are built, vastJy were only founded in the early 1980's increase their speed and decrease their they are accredited with supplying one costs per unit calculation (, third of all CAD/CAE equipment used July 27, 1986, p. 01). Yet Lattice concen­ in the US. The latest Tektronix "birth", trates on research and development, test­ Magni Systems Inc., set up in 1984, ing and marketing in their new Sunset produces test equipment for video and Corridor complex, sub-contracting chip television transmission systems and is manufacture to Japanese and Californian already finding markets all over the suppliers. US. and Japan (Figure 12.2). Entrepreneurial activity and innova­ lntel Corporation, an arrival from tion has thus generated an increasingly California. in 1976, has been another "information-rich" environment, resembling important source of spin-offs. One, "Silicon Valley" in some respects and (Beaverton), in minia ture. Portland entrepreneurs set up in 1982; has just won the largest have certainly created a young and vigorous electronics export contract ever recorded. "Silicon Forest". in Oregon - to supply scientific computers The In-Movement of to Siemens A.G., the West German High Technology Firms electrical engineering and electronics corporation. Another, Lattice Semicon­ The most significant new trend in ductor (Beaverton), spun off in 1983 to the area's high technology development make high speed semiconductors, and is in in-migration of out-of-state American­ increased its employment by 25 percent owned and foreign firms. Inward move­ to 150 employees. while doubling sales ment has swollen the range and the in 1986.. Now on the brink of being the ranks of new industries in the area during first US. firm to manufacture a 256K the past decade. Early in the 1970's the fast static random access memory corporate managements of two leading (RAM) chip, American high tech employers -- and Digital Equipment -- decided, after lengthy investigations, not to locate in Oregon. They found the State apathetic. The. ttirningpoint came in 1976-77·whenSilicon Valley-based firms Figure 12.2: Geneology of high tech in­ Hewlett Packalid and Intel Corporation d ustri~s. in .Port,1and. The established plants in Portland to make process began after World personal computers, printers, silicon War II with the develoPlTIent of Tektronix and Electro wafers, micro-processors and memory Scientific Industries. components. Today Intel is the area's Employees from , these .busines­ second-'largest I high tech :firm, with ses eventually began . their 3;250 workers. Other. US. finns followed, own businesses resulting in more and 'more "spinoffs" suc:h as Spacelabs Inc., a Squibb phar­ producing the mUltiplicity of maceutical subsidiary, making electronic firms that now exist< medical monitors.; Union Carbide, produc­ 182 Silicon Forest ing crystal materials for semi-conductors markets in aerospace, biomedical, com­ and polysilicon; and Litton Ind ustries, munications and automotive indus­ making aerospace electronics. tries, some of which are located in the The most dramatic change, though, Pacific Northwest. has been the sudden "invasion" in the WILL THE SILICON FOREST 1980's by foreign multinationals, locating GROW TALL OR throughout the metropolitan region. SHED ITS LEAVES? First came Wacker Chemie (Siltronic) from West Germany which now man­ Local entrepreneurship alone ufactures 35 percent of all American­ explained the growth of high tech in­ made silicon wafers. Currently it is ex­ dustries in the Portland metropolitan tending its operations relocated along region until the late 1970's. Innovators, the Willamette River by adding the mostly dedicated Oregonians or immig­ world's largest factory for manufacturing rants "addicted" to Oregon, neither polysilicon, a new substitute for silicon. wanted nor needed to locate elsewhere The presence of such industries is tes­ in the U. S. Initially they found timony to the way the environmentalist adequate markets in the Pacific North­ lobby in Oregon has paid off. Output west but their products were light, high of these products needs clean water in value, and easily transportable by truck large quantities. or air to other regions of the country Then came Japanese firms, almost in and abroad. A threshold or "critical follow-the-leader fashion, mainly in mass" of manufacturers developed 1985. SEH America, a subsidiary of around the base provided by Tektronix, Shin-Etsu Handotai Co. Ltd . (Tokyo) generating sufficient volume and diversity making silicon wafers relocated from of market needs, components, products, San Jose to Vancouver (Washington). software, information and ideas in a National Electric Corporation (NEC), rapidly changing technological field, to the first Japanese company to build a act as a magnet for more new entrep­ factory in Portland, is spending $25 reneurial endeavor. The cluster of locally­ million. on a fibre optics plant for radio owned firms created a vigorous business and . is in­ environment for self- sustaining growth vesting $170 million in two plants, one and development. But high wages, strict for making semi-conductors, the other environmental controls, and substantial for disk drives. , a Seiko- owned distance from larger U. S. market regions corporation, will assemble computer had in the past discouraged managements printers in a $30 million facility. Three of many industries from even considering of these plants are clustered between a location in Oregon. U. S. 26, the Sunset Corridor, and the By the 1980's, however, the shape ; the Fujitsu microelec­ and form of high tech in Portland was tronics plant is being built in the east, becoming more dependent on increasing near Troutdale (Figure 12.1). Just across numbers of engineers, venture the Columbia, in Vancouver, capitalists, and firms being drawn in Northwest Inc., a subsidiary of Kyocera from more distant regions, particularly Corporation (Kyoto, Japan) will soon from California; and on in-migration of open a semiconductor factory which is foreign firms. In part, this has been expected to supply surface-mounted induced by other important changes, ceramic capacitor chips to revitalizing especially by increased state and local Silicon Forest 183 initiatives. states. The city is a major center for recycling newsprint, cardboard and State and Local Initiatives: glass, which may not be "high-tech" Stimulants to Development operations, but Oregonian attitudes have Most fundamental has been a major acted as "push" and "pull" factors in shift in the attitudes and policies of the innovation of high tech processes Oregonians -- largely in response to a and products by existing and new firms. deepening crisis caused by declining, For instance, a division of Tektronix recy­ even disappearing, staple industries cles mainly to recover valuable precious (see Chapter 10). After years of dis­ metals. In 1984 Environmental Pacific couraging immigration and investment Corporation (EPC) of Lake Oswego was -- to prevent Oregon from becoming founded to recycle materials from all another California -- the State has been kinds of batteries. Now EPC makes a forced to court new business. State wide range of leak-proof steel and plastic policies for protecting environment and containers for transporting hazardous raising the quality of life, however, cargo, recycles batteries from as far away have had their positive long term as New Jersey, and works at the cutting­ effects in inducing local enterprise. edge of technology to re-use plastics. A strong commitment to excellent Thus Oregon policy creates comparative State medical and health care, which is advantages for local firms to exploit and virtually free to State employees, has deepen the richness of the local informa­ been an important stimulus to localization tion and technology environment. in Portland of a multitude of medically­ By contrast, U.S. federal policy has orientated high tech firms. Examples played little role in high tech development are Drake Willcock (artificial kidney in the metropolitan region. While many machines), Cardiac Resuscitator Corpor­ American high tech centers, including ation (pacemakers), Horizon laser Systems Silicon Valley and Boston, have greatly (ophthalmic laser surgery systems), benefitted from the external stimulus Life Science Instrumentation (cardiac of federal defence spending (Glasmeier, monitors), Parks Medical Engineering Hall and Markusen, 1985), no major (Diagnostic equipment), National defense-related contracts have ever Appliance Co. (biomedical research been placed with Oregon firms. It was equipment) or Kirkman Laboratories recently reported (The Oregonian, April making dental appliances. Hewlett 4th, 1986), however, that Floating Point Packard has a branch in McMinnville, Systems has a new FPS T computer southwest of Portland, making cardio­ which may be the kind needed in "Star pulmonary resuscitation and X-ray equip­ Wars" anti-missile defense systems. If ment. so, history could be changed, depending Similarly, State concern for the envi­ on Oregon lobbying in Washington and ronment has opened new markets for the outcome of superpower agreements firms like Harco Manufacturing making on arms control. But on May 8, 1986 water, noise and wood-stove pollution the U.S. Department of the Interior control devices and Grinnell (Lake closed its Bureau of Mines' Albany Oswego) fire protection systems. A large Research Center specializing in thermo­ recycling business has developed to dynamics. Located in the "Oregon high serve markets both in Oregon and en­ tech corridor" south of Portland -­ vironmentally-conscious northeastern embracing Salem, Albany, Corvallis and 184 Silicon Forest

Eugene -- the laboratory was a major measure "opened the gates" to foreign promoter of high tech metallurgy processes investors, particl,llar\y those J?panese 10caUy, not least for PCe. Not surprisingly, firms which, up uptil now, had refused many Oregonians believe that there is to locate plants in the U.S. states, of longstanding and deepening federal which there are 11 including California, discrimination against their state. that still retain the unitary tax system; Since the late 1970's state and local Following the repeal all the promised authorities in Oregon have replaced investments from Japan became building apathy towards to downrightdiscour­ operations and Wacker Siltronic decided agement of businesses, by vigorous to go ahead with the adrution of its campaigning for dean industry com­ polysilicon plant. bined with plans for careful environ­ Less easy to assess is the effect of mental management and improvement. Oregon's lack of a sales ' tax (one of the Poljcies are now orientated to stimulating few states so remaining). Introduction of new industrial development and have such a tax was rejected ' by the Oregon taken several forms: . legislature in 1985. Big retail shopping (i) Delegations of Oregonjans have centers alid what is reputed to be visited East Asia, especially Japan, to America's largest· Safeway supermarket recruit firms by selling the advaritages are located on the Portland side of ' the of industrial location in Oregon. With Columbia to tap the Washington con­ the further objective of securing major sumer market (which has a sales tax). export contracts for both 'sta pie and But that may have far less tangible effects high tech manufacturers, Oregon offi­ on the growth of high tech (or other) cials have "twinned" their State with industries because, in contrast to most the Province of Fujian, China, in the statesj Oregon still does not offer finan­ coastal zone lying ' between Shanghai cial incentives to induce business to the and Guangzhou(formerly Canton), an State: OregonianS prefer to advertise its area favored as a "forward zone" for superior environmental advantages, Den Xiaoping's economic modemization natural beauty, and quality of life. Opinions program. Portlandets who, for a cen­ have been expressed, though; that tury, have romanticized about their city Washington state uses monetary. in­ as the "Gateway to the Orient" are now ducements to firms like Kyocera, SEH endeavouring to turn it into economic America, Hewlett-Packard, Union Carbide, reality. One trade delegation to Tokyo RCA and Sharp to locate in Vanc~)Uver in 1984 produced the promises of in­ while employees enjoy the same access vestment by NEC, Fujitsu and Epson -­ to Oregon's envir.onmerit! provided that Oregon reform' its tax (iii.) Adoption and implementation of system on multinational corporations: land use plans to zone commercial, The State obliged. And in March 1986 industrial, residential and transport a Keidanren delegation of leading functions in the ' area enable loca·l Japanese businessmen ·toured sites in authorities,' in former Gov'e'rnor Victor the Portland area. I Atiyen's words, "to combine development (ii) Repeal, in August 1984; of the wi,th environmental quality." This is state's aliitary. tax 'I'avirs replaced .a levy partkularly critical 'in'suburbswest of on the worldwide business of any multi­ Portland: where,' almost' "repeating' his­ national located in' :the state by a 'tax tory of the-, Oregon Trail·, the Tualatin only on ' its . Oregon ope'rati0ns. ' This Valley has become the , mos~ desirable Silicon Forest 185 settlement zone - this time for high and manages. And recently, the 1-5 Cor­ tech industries, and. their employees. ridor Association has launched a major Original firms like !~ktronix quickly campaign to advertise the advantages outgrew their central or inner city sites, of the zone embracing Tigard, Lake especially the "incubator zone" of the Oswego, Wilsonville and Aurora centml east, side, relocating to the western around the 1-5, 1-205 and 1-217 inter­ semicrural fringes in and around changes. Beaverton; today a thriving suburb and In contrast to the congestion of the the very hub of the "high tech cor­ San Francisco Bay area or Los Angeles, ridor" .(Figure 12.1). the ability to provide attractive living In 1981 Washington County adopted and working environments in Portland the "Sunset West" Plan for the zone within one or two hours' easy drive of along US. 26, a route long called the dense forest, majestic mountains, fish­ Sunset Corridor leading out of Portland filled rivers, an imposing coast of cliffs to the coast. The name today is and sandy beaches, Indian reservation paradoxical since it hosts increasing resorts, and desert, is clearly all. ex­ numbers of "sunrise" industries. The tremely powerfullocational incentive to Sunset West plan, collaborated through businessmen who put a high premium the Tualatin Valley Economic Development on the quality of life. Corporation with plans for adjacent (iv) At the region's very heart, the parts of Clackamas and Multnomah City of Portland is strenuously improving counties, embraces two-thirds of the the national and international mag­ buildable land within the metropolitan netism oJ the Silicon Forest. To' uphold region and so holds the key to its tile image of the "Rose City", "America's economic fu ture. Plans seek to sustain most livable city," and to avoid the fate the very high environmental standards suffered by so many US. cities with already set by Oregon entrepreneurs dying or decaying, down town areas, the and residential developers in creating City has raised and spent $1.25 billion distinctive landscaping styles of a ttrac­ in the cen tral district since 1970 (see bve buildings .sited to preserve groves Chapter 4). Attractive new residential of oaks and firs, with office or house developments rise near a waterside windows facing snow-capped Mount park and marina which replaced the Hood on .the eastern skyline. scruffy riverside highway along the An important role in marketing and Willamette River in the early 1970's. managing land is played by the Port of Squares combine architecturally exciting Portland (see Chapter 11). Owning half public and private office buildings and the available industrial land in the Rose open spaces with pavement cafes, trees City,a quarter of that in the entire and cascading waterfalls. Major hotels metropolitan region, the Port coordi­ have been joined by a Performing Arts nates the architectural and landscaping Center, a Civic Auditorium, an ex­ laying out of manufacturing, science, panded or restored historic Old Town research and development and ware­ resembling London's Covent Garden, housing parks with improvements in and a restored "Chinatown," attract the handling ca pabilities of the river­ tourists and Portlanders alike. Finally, a port and city's three airports (Portland central transit mall on SW 5th and 6th International, Hillsboro and Troutdale) Avenues, reserved only for buses and which the Port of Portland also owns pedestrians, has been adorned with 186 Silicon Forest domed bus shelters, trees, flower beds, Eastern Seaboard-Pacific routes. rose baskets, cafes and statues, to re­ CONSTRAINTS ON create the appearance and atmosphere HICH TECH DEVELOPMENT? of the Parisian boulevards. Major attention has been paid to im­ The foregoing factors operate simul­ proved public transport. An extensive taneously with worsening problems in "Tri-Met" bus network offers frequent California to tip the balance of advan­ and relatively inexpensive services, with tages for high tech industries more completely free travel in the downtown positively toward the Silicon Forest. But "Fareless Square." Construction of a fast there are several reasons why Portlanders light rail system (MAX) from the outer­ cannot be complacent about the inevita­ most eastern suburb of Gresham to bility of high tech growth in their region. downtown Portland, a distance of 12 This has been recognized , for instance, miles, is the latest attempt to make the by the Bonneville Power Authority central city highly accessible. which in 1983 predicted that Oregon's Such developments partly explain high tech would employ 180,000 people why employment in central Portland has by 2005, but has since revised that esti­ doubled in .the last 15 years to 85,000 mate substantially downward to between jobs today. City officials and local 100,000 and 140,000. Any of these businessmen hope this will further figures could be over-optimistic because attract major corporations. Recent deci­ of: rising land values, alternative loca­ sions by Eastman Kodak, Honeywell, tional opportunities elsewhere for high Westinghouse Electric and major insur­ tech development, competition and ance firms like Prudential, Philadelphia business cycles, and constraints in local Life, and Sun Life of Canada, to set up labor markets, venture capital supplies, their Pacific Northwest offices at Johns and educational facilities. Landing beside the Willamette near the Land Values downtown are signs that Portland is be­ coming a "regional headquarters city," a Escalating land and housing costs trend which could strengthen its pull on around Silicon Valley and increasingly high tech industry and services. lengthy and time-consuming commuting Very relevant to these aspirations is for workers are prime factors pushing that Portland now offers extensive land Santa Clara Valley businessmen to "seek sites (greater than 3,000 acres) ready for greener pastures." Some are finding them industrial development beside deepwater in Oregon. Thus Portland may be able port installations along the Columbia to siphon off some high tech from other and Willamette Rjvers as well as 130 areas. Good homes in less crowded sur­ industrial and business park sites (ranging roundings sell at one-third to one-half from 5 to 500 acres). As the only sig­ the prices of those in comparable areas nificant metropolis between San Francisco of California. Several engineers have and Seattle and one of only five major sold their San Francisco Bay area "Pacific Rim" gateways along the U.S. homes, bought new ones in Oregon, west coast, Portland may be able to using the capital saved to start their exploit outstanding "intervening oppor­ own high tech businesses. These are tunities" to become a major crossroads, just the kind of people that Oregon tapping business along the north-south officials wish to attract because they Alaska-California and east-west U. S. "import" the newest technologies to Silicon Forest 187 the Silicon Forest, adding to its vigor Phone's sales have doubled and now and diversity. Of course, not all this account for 15 percent of the U.S. mar­ growth is occurring in the Portland ket, but the manufacturing of the latest area. There are other clusters of high machines has been transferred to Japan tech around Eugene and Salem, and in and South Korea. the Medford-Ashland area near the On the other hand, investments by California border where research support Japanese firms in Portland, e.g., NEe, can come from the Oregon Institute of Fujitsu and Epson may merely be diver­ Technology at Klamath Falls. sions from California only so long as it The influx of engineers and firms retains unitary taxes. Time will tell into the Silicon Forest is, of course, whether the in-migration of Japanese already having important local reper­ firms is going to be sustained. There cussions on the demand for land. could be stagnation in Oregon high Prices are rising fast, bringing other tech investment by foreign firms, changes in their wake. Tualatin VaHey though probably not in "raw materials" grain farmers are under increasing pres­ production of silicon, polysilicon and sure to sell their land. So, too, are the other substitutes (such as gallium arse­ filbert producers who have no serious nide) in which Oregon seems to have a world market rivals except for Turkey. comparative advantage. The currently Some rural landscapes will become estates high exchange value of the yen against or industrial and science parks within the dollar may accelerate relocation of the framework of the Sunset West plan. production from Japan to the U.S.A., a Yet some small, rundown settlements, process in which Portland may share. like Orenco, which are more accessible But, in any case, such growth or in­ to the western high tech corridor are ward movement depends very much also being revitalized. on the absorption capacities of the U.S. and world markets for high tech final The Potential for Relocation products, an issue discussed below. and Locational Displacement Labor Markets Much doubt hangs over the value of drawing away from California industries rt is unclear as to how far either the such as Hewlett-Packard's calculator­ number of jobs created in high tech assembly plant located in Corvallis. industries, or the levels of remuneration That kind of operation essentially creates and skill engendered, can truly com­ semi-skilled jobs in standardized goods pensate for jobs already lost or about output which is highly susceptible to to be lost in the region's traditional short-term cyclical fluctuations, rapid industries. For instance, in July 1985 obsolescence, or medium-term relocation Recording Corporation of American to very much lower labor cost regions. (RCA) and Sharp (Japan) announced a The "Gateway to the Orient" in this jOint venture to bring 700 jobs by 1989 sense means a drain of manufacturing and 2,000 by 1995 to the Vancouver­ jobs across the Pacific to Asia. An example Camas area along the Columbia River. is Code- A-Phone Corporation But this would not have compensated (Clackamas), founded in 1958 to make for the 2,500 jobs last by the threatened answer phone devices. Since the dives­ closure of the Crown Zellerbach paper titure of American Telephone and Tele­ mill. Yet in announcing their plan RCA graph Co. (AT&T) in 1983, Code-A- and Sharp made it clear that they 188 Silicon Forest would bring in highly skilled electronics be susceptible to similar problems in workers from other regions because many the shorter term, given the accelerated CaI'nas paper mill workers would be pace of innovation. Moreover, there are unsuited even to retraining for the new high levels of automation and use of jobs. By contrast, Fujitsu managers numerically-controlled machines in the claim that they can turn loggers suc­ production of semiconductors, not only cessfully into high-tech workers! Only with limited jDb-creationcapacity,but time will tell if they are simply trying also with a significant propensity for to "blind" Oregonians to reality. new development in newly industrializing Perusal of job advertisements pro­ countries of East and Southeast Asia . vides evidence that, with the excep­ . Several examples from the experiences tions of highly" paid executive and re­ of the metropolitan region in the past search and development positions, two years well illustrate these problems. most high-tech workers can only_expect Since January 1985 Tektronix had lajd­ poor pay ($12,000 to $30,000 per annum) off 1,500 workers, affecting several compared with recent wages of up to facilities in Portland, while Intel Corpora­ $55,000 per annum in mining, logging, tion has shed more than 1,000 jobs, paper making and other regional involving closure of a plant in Aloha. "staples". Under these conditions it Both are a response to depression in; may not be surprising if some fonnerly and saturationoL the world computer highly-paid workers from traditional in­ market. The same difficulties have dustries choose not to work in high slowed construction of Kyocera North­ tech. Labor supplies in the metropolitan west Inc.'s chip factory in Vancouver area, however, are unlikely to constrain and postponed indefinitely its plan for new development, even in highly-skilled a research and development unit there. functions, for reasons outlined below. , a Silicon Valley headquartered firm, potentially one of Competition and Cycles Portland's largest newcomers, recently in High Tech Business , -. , abandoned plans to build a $150 million What makes the benefits of high tech res€arch and -development laboratory employment even more doubtful is the and 32-bit chip factory in Hillsboro. strongly cyclical and highly competitive Most dramatic was the 10 . July 1986 nature of the industry. There is already cancellation of the proposed U.S.­ much overcapacity in some final products Japanese joint venture, the Camas markets, with feedback effects on the semiconductor manufacturing plant demand for the "raw materials and and research and development unit. In energy" inputs, especially of microchips. this case, General Electric's December The world has been experiencing a 1985 atquisition of RCA doomed the major "microchip war" between Japanese project; GE had already commissioned and American firms. Their factories are an expensive state-of-the-art ,plant for operating at only about 70 percent similar microchip production in North capacity. Although some agreement Carolina's Research Triangle and wanted has been reached by the two countries to eliminate potential .competition from on this issue, no guarantees can be a rival U.S. firm which had Japanese given that' the new generation of semi­ backing. Severe competition is thus oc­ conductors to be produced by Lattice curring between regions concentrating Semiconductor, for instance, will not high tech within the US.A. Finally, one Silicon Forest .I 189 of the metropolitan region's leading risky, but Oregonians generally seem high tech manufacturers, Floating Point to accept the use of some of their lottery Systems, has suffered serious devaluation money for the good causes of job and of its market rating following the business generation. To assist in this announcement of reduced revenue earn­ process, The Northwest Financial Sym­ ings. These ensued from budgetary cut­ posium for Emerging Companies is backs by commercial, academic and gov­ offering an annual forum for firms to ernment organizations which restricted present their cases to groups of venture the market for high- speed scientific capitalists from all over the U.s.A. Having and engineering computers. helped firms like Lattice Semiconductor and Metheus Corporation to obtain Venture Capital capital in the past, there is optimism Another worry concerns the role of for Portland's future. venture capital as a possible constraint Educational and on the development of Portland's high Training Facilities tech industry. Unlike San Francisco or Seattle, Portland is not a major banking Finally, there is a view that neither and financial center or a source of ven­ Portland nor Oregon and southwest ture capital which has been so instru­ Washington can match the quality and mental in taking the risks and support­ quantity of educational facilities that ing the high tech successes, for in­ have contributed to the high tech stance, of Boston or Santa Clara Valley. leadership of the Boston and San Portland firms must obtain their ven­ Francisco Bay areas. Nor, some admit, ture capital primarily from outside the do they match the educational facilities state. Indeed, Magni Systems Inc., that are key ingredients in growth i.ri. raised capital in 1986 from a combina­ North Carolina's "Research Triangle," tion of sources in Portland, Silicon Valley, Colorado's "Silicon ·Mountain" or Texas' and Tokyo. Some Oregonians, with typ­ "Silicon Prairie." Th us capital from Tek­ ical business cau tion, are questioning tronix and other leading Portland firms the extent to which even the limited has established the Oregon Graduate venture capitalists seek to maximize the Center (OGe) as a private non-profit speed and scale of their profits and, in educational institution on the cuttIng so doing, propel high tech firms through edge of researdl in physical and biological short "boom-and-bust" life cycles. Then, sciences, engineering and electtonics. too,. some entrepreneurs may welcome Recently it spearheaded the development such pressures because they might be of the OGC ScieDce Park in the Sunset in business to "get rich quick," without Corridor to combine research and to either care for local economic health or expand high tech manufacturing. Planar any commitment to the long-term utility Systems and Bipolar Integrated Techrlolo­ of the product they are making. gies Inc., both local spin-offs, are its In an effort to reduce some of these first occu pants. negative features, the State began in Moreover, electrical engineering and 1985 to use 20 percent of the $88 million other science deparhnents; at Oregoli revenue raised by its new lottery for State Univets'iiY (Corvallis), the University venture capital and to make careful of Oregon (Eugene) and Portland State selection of the recipient companies. University, once · rivals, are now col­ Picking likely "winners," however, is laborating to pool knowledge, to under­ 190 Silicon Forest take key research and to develop or Tualatin Valley Economic Development Cor­ intensify links with business. Great poration, 1985, Metropolital1 PO/'t/alld High store is being placed on their capabilities, Tech Directory, Oregon Business, various issues 1985-86. for instance, to innovate economic pro­ duction of gallium arsenide by a local firm on a sufficient scale to gain a world comparative advantage in what is now known as the major substitute for silicon. They may have already "missed the ship"; recently announced the development of a gallium arsenide chip in California (Far Eastern Economic Review, October 17, 1986). Moves are also afoot to upgrade Portland State University - with an Advanced Technologies Institute, Inter­ national Center for Trade and Commerce, and Urban Studies and Geography Departments -- into a more effective force in fostering, understanding and predicting the role of high tech activities in the daily lives and work of the people of Oregon and the Pacific Northwest. With so much llmovation and drive amongst the area's high tech en­ trepreneurs the future appears to bode very well indeed.

REFERENCES Glasmeier, A. K., Hall, P. G., and Markusen, A. R., 1984, "Recent evidence on high­ tech nology ind ustries' spa tial tendencies: a preliminary investigation", Congress of the Office of Technology Assessment, Tech nology, Innovation and Regional Economic Development, Washington, D. c., pp. 145-167. Saxenian, A., 1985, "The genesis of Silicon Valley", P. Hall and A. Markusen, (eds.), Silico/1 Lal1dscapes , Allen and Unwin, Win­ chester, MA .lLondon, pp. 20-34. Steed, G.P.F., 1986, "Policy and high technology complexes: Ottawa's 'Silicon Valley North"', in: Hamilton, F. E. lan, Ed. , Il1du str ial Change in Advanced Ecollom ies , Croom Helm, London, pp. 261-69.