High-tech manufacturing maintains Vermont presence

Vermont Business Magazine, Jul 01, 1999

It's not easy to be a Vermont manufacturer of computer chips, boards, accessories, electronic components or machines to make such devices. Then again, it's not easy anywhere.

But the state with the cow on its flag does have some impressive examples of super-high-tech production, and that's not just because of the northwestern quadrant of the Green Mountain State has horizons tinged with Big Blue.

Despite corporate changes and restructurings, cyclical swings, high capital costs, high energy costs, a rural state's not-quite-just-in-time transportation systems, and now a nationwide labor crunch, examples of such companies can be found scattered around the state.

Vermont's lifestyle helps attract talent in some cases. But top scientific and engineering personnel often prefer urban environments, where they have a choice of jobs in the same field, rather than having their future tied to a single boss.

Perhaps more relevant to high-tech's survival in Vermont, hard work and concern about quality have not gone out of style in the workplace, and are found to a high degree among the state's operatives, their managers say. Efforts to redirect education toward high standards and to involve students with technology during their secondary school years are seeking to build on that heritage.

As a sector, digital-electronic manufacturing is difficult to define, except perhaps operationally. To that end, the varying fortunes of this field of endeavor are suggested here in profile, by looking at some of the state's manufacturing firms.

The number of those who always think of IBM as International Business Machines is probably about the same number who still use Selectrics. That typewriter ruled in its hey day, and IBM's PCs once predominated, but this is a company with a strong record of reinventing itself.

Which is good news for Vermont, because IBM's Essex plant accounts for about 7,000 jobs, and their relationships with suppliers and spinoff companies further fuel the state's economy. Spokesman Jeff Couture said that employment will probably rise some by the end of the year, though they are struggling with the labor shortage like everyone else.

Other branches of IBM are getting strong reviews for things like excellent voice recognition software, but the Essex plant has to survive as part of the computer chip industry. Some established companies have hit rough patches in the road because the lower-end, more easily produced chips can often be supplied by desperate foreign manufacturers, and in any case offer less headroom for added value.

But IBM has stayed on the leading edge, Couture said of the factors that can help attract new personnel. Three developments in particular seem promising for the Vermont operation, he said.

One is a shift from aluminum to copper as the electrically conductive material used in chips, Couture said. Copper being more conductive, the result is faster processing times.

But the electrical charge can leak away without insulation. There, a newly developed insulating coating is solving the problem, Couture said. Finally, those techniques and others are helping to move toward the ideal of "a computer on a chip" by combining different functions on one microprocessor, Couture said. The utility of this miniaturization in creating cell phones, note pads and other computer appliances. That has IBM up against companies like Intel, Motorola and Toshiba for a share of a developing and potentially lucrative market.

Racing to compete means competing for employees. Couture said their presence in Vermont is a mixed blessing: some people dream of living here, but some who are ambitious to climb the corporate ladder prefer a place like the Silicon Valley, where many companies are likely to have openings in their specific skill area.

"We do have good pay and good benefits," Couture said. Also, because IBM is so big, there are many opportunities to move around and develop and keep one's interest, without having to change employers.

As for the business climate, Couture said Chittenden County does have an Interstate and an international airport, so moving things and people around isn't a big headache. Electrical costs are more of an issue, and there, IBM has been vocal about increasing the competition and reducing rates.

Machinery and equipment taxes, finally eliminated statewide by Act 60, might have been a problem except that Essex had already worked out a deal by which they were going to be eliminated over a seven-year period. That agreement, signed in 1995-96, survived the state law, Couture said. Inventory taxes had been abolished locally back in the 1980s.

"We've had a long history of fair dealing with each other," Couture said. The agreement was part of IBM's sensitivity to making sudden changes in a community where they play such a major role, he said.

CASH NEXUS

If IBM matters to Essex, then Nexus Custom Electronics matters to Brandon. A contract maker of printed circuit boards, Nexus has been in the Rutland County town of 4,200 for 32 years. Benefiting in its earlier phases from IBM outsourcing, Nexus started as RFL Industries, then became Dowty Electronics, then as Nexus was acquired by Jaco Electronics, a Long Island electrical equipment distributor.