Electronics manufacturing short circuited in Indiana

  • Comments
  • Print

Larry Wallman isn’t one to scoff at 200 new jobs in Indiana. But he thinks last month’s announcement that GE Aviation will break ground in Lafayette in June on a jet engine plant should be put into perspective.

“That’s a $100 million investment, and that’s great,” Wallman said. “But there are bigger fish out there, and ones we can catch. Look at what Mesa, Ariz., is doing, and New Mexico, Oregon and upstate New York.”

Those regions are adding massive electronics manufacturing facilities. Apple announced in November it would convert a closed solar-panel plant in Mesa into a $1.5 billion advanced manufacturing plant. The Apple facility will create 700 jobs, company officials said, with an average annual wage above $45,000. Business Facilities magazine named Mesa’s Apple coup the Deal of the Year for 2013.

“This deal puts Greater Phoenix on the map as a leading high-tech hub,” said Business Facilities Editor Jack Rogers.

In upstate New York, the town of Malta in 2009 landed a $6.9 billion investment from Global Foundries to convert an abandoned rocket-testing site into a semiconductor factory. That project was completed in December 2013.

IBM in 2011 pledged to invest $3.6 billion over five years in a computer-chip manufacturing facility in upstate New York. That project is ongoing. In Austin, Texas, Samsung in 2013 began work on a $4 billion plant. In Chandler, Ariz., Intel is investing more than $300 million to build a research and development facility.

All those electronics firms promise jobs well over the national average of about $45,000 reported by the Social Security Administration. The 200 jobs GE Aviation projects in Lafayette by 2020 offer considerable wages, with average annual salaries of $75,000, according to company officials.

But that is below the $93,600 average wage of workers in the electronics manufacturing sector, according to Washington, D.C.-based TechAmerica, the nation’s largest electronics trade association.

“This is an industry that pays well above the average and it’s seen as a clean industry,” said Matthew Kazmierczak, vice president of research and reports for TechAmerica Foundation, the organization’s research arm. “There’s good reason for regions to go after these jobs.”

Wallman and others in the local electronics sector think Indiana officials need to do more to capture a bigger slice of the sector, adding that it doesn’t have to be an either/or scenario.

“Much of what makes this state strong in heavy manufacturing can be a draw for electronics manufacturers,” Wallman said.

Electronics manufacturing covers a wide swath including computers, semiconductors, communications, electrical components, space and defense, and measuring and control instruments.

The industry is best known by the names of a few dozen retail giants, but also includes myriad parts suppliers, government contractors and companies working primarily in the industrial realm.

Local and national losses

Wallman, who has worked three decades in the electronics manufacturing industry and is now a manufacturers representative for Indianapolis-based Hi-Tek Sales, sighed as he looked over a list of electronics manufacturers he’s compiled that have moved out of state in recent years.

From 2002 to 2012, Indiana saw a 29.1-percent decline in electronics manufacturing jobs, a slightly higher rate than the nation experienced. The state lost nearly 7,000 positions in the sector, representing $73.8 million in annual wages, with a number of those jobs coming from the metro Indianapolis area, according to the U.S. Bureau of Labor Statistics.

“I’ve seen so many of the companies I work with just up and leave,” Wallman said. “A lot of them have relocated within the U.S.”

He ticked off a long list: “Western Electric, Mallory Metallurgical Co., Northrop Grumman, RCA … all gone. I could go on.”

The scary part, he said, is that the exodus of Indiana’s electronics manufacturing jobs is far from over. Federal Mogul, with 95 jobs, north of Fort Wayne is closing this fall. General Motors’ research and development facility in Castleton is moving to Pontiac, Mich., in the middle of this year, eliminating another 80 Hoosier jobs.

Indiana still hosts nearly 17,000 electronics manufacturing jobs, according to the BLS. Wallman predicted that number will decline more than 10 percent in the next three years. As recently as 1985, the state had 80,000 such jobs. Two decades earlier, Indiana had more jobs in electronics manufacturing than in automaking.

While Wallman conceded area officials can’t keep all companies from closing or moving, he criticized city and state officials for not seeking replacements—let alone supplements—in the electronics manufacturing sector. “When a warehouse closes, we work to replace it,” Wallman said. “When an electronics firm closes, we just throw up our arms.”

Rep. Mike Karickhoff, R-Kokomo, represents an area that was formerly a hot-bed for electronics manufacturing, and he thinks that heritage can spur future growth for the region.

“Our community talks about this all the time,” Karickhoff said. “We still have a core group of people—from places like DuPont Photomask which left here seven or eight years ago—with an expertise in electronics. We want to take advantage of that.” Karickhoff points out there are two primary job segments in the electronics field—engineering and manufacturing—“and both are very important and attractive for us.”

Deron Kintner, Indianapolis’ deputy mayor for economic development, said that while the city is “very aggressive” in going after manufacturing firms, it has no strategy to specifically target electronics firms.

“Our efforts aren’t that specified,” Kintner said. “We’re going after manufacturers. Period. We feel we have the work force that manufacturers are looking for and we have the facilities and land where they can locate. We’re heavily focused on going after the manufacturing sector as a whole.”

Officials for Develop Indy, the city’s economic development division, declined to comment. Katelyn Hancock, spokeswoman for the Indiana Economic Development Corp., the state’s economic development arm, said no one from her organization had time to talk to IBJ for this story.

From the jaws of defeat

TechAmerica Foundation’s Kazmierczak said there are signs the industry is bouncing back, and pockets in the United States are poised to take advantage. Manufacturing costs offshore have risen to the point companies want their plants to be in America in order to be closer to their research and development workers and to their customers, he said.

“The most profit-generating segments of electronics manufacturing is done in the U.S., while the more commoditized, low-profit-margin, high-volume segment of it is what tends to go overseas. We’ve seen the gross domestic product of this segment bouncing back and that’s encouraging.”

Rogers, the Business Facilities editor, said places like Phoenix have pushed aggressively to lure tech manufacturers by providing suitable existing buildings and shovel-ready sites, partnering with area schools to provide a trained work force, and offering strategic tax incentives. By drawing the likes of Apple, he added, Arizona is poised to draw myriad electronics supply and other tech type companies. “Innovative thinking, quick action and impressive regional cooperation enabled Arizona to snatch victory from the jaws of defeat in creating a bold new opportunity for the First Solar site in Mesa,” Rogers said.

New York Gov. Andrew Cuomo has spearheaded several initiatives to make New York’s Tech Valley—which stretches from just north of New York City to the upper northern reaches of the state—a major growth area for electronics. New York officials say the area has more than 1,500 of the companies—including hundreds of manufacturing firms.

Forbes magazine recently predicted that New York’s Tech Valley could soon surpass California’s Silicon Valley in economic importance.

Why not Indiana?

Indiana is near the top of most national manufacturing lists in terms of jobs, but only 21st in electronics manufacturing jobs. Most troubling, perhaps, is that Indiana lags nearby Illinois, Ohio, Wisconsin and Michigan in the jobs.

Noel Atkinson, who developed the electronics systems for the Bearcat police scanner, ground-mounted air-traffic control equipment and the video cassette recorder at three Indianapolis companies, said it’s not too late for Indiana to turn the tide.

“We have everything that states like Arizona and New York have,” said Atkinson, a local consultant who has an undergraduate degree from Purdue University and a master’s degree from Southern Methodist University in electrical engineering and has spent 47 years in the industry.

“We just need to change our attitude and atmosphere,” he said. “If we can attract Toyota and Honda, why can’t we attract Intel and Hewlett Packard?”

Unsuitable work force?

The biggest drawback to drawing high-tech and electronics firms might be the state’s available work force, said Jerry Conover, director of the Indiana Business Research Center at Indiana University’s Kelley School of Business.

In the Phoenix area, for instance, a recent Motorola plant closure left numerous electronics workers looking for work.

“I’m not sure you have that type of supply here,” Conover said.

Atkinson disagreed.

“We have a heritage in electronics manufacturing,” he said. “There’s no reason we can’t attract these jobs. There’s a mind-set in this city and state that we can’t compete with Austin and Silicon Valley for these jobs, and that’s just not right.”

Atkinson said that, in addition to a veteran work force in the electronics industry here, Indiana boasts two colleges—Purdue and Rose-Hulman Institute of Technology—“that are among the best at turning out experts in this field.”

In addition, he pointed out that Ivy Tech Community College is the largest single community college in the nation and has an established electronics program.

Adding to the brain drain

Atkinson often meets Purdue graduates working at electronics firms out of state.

From 2009 to 2013, 53 percent of Purdue’s electrical engineering graduates took jobs outside Indiana. In 2013, it was 60 percent, according to Purdue records.

“We’ve never had a brain drain,” Wallman said. “We’ve had a forced exodus of our brain power.”

Kazmierczak thinks Indiana has an image problem with the tech community.

“When technology companies look to locate their facility, they look to see where the tech workers are, the research centers and the companies in their sector doing the best work,” he added. “The lack of those things or the perception of the lack of those things has hurt Indiana.”

There’s good reason Indiana is able to land companies like GE Aviation and other heavy manufacturers and has more difficulty in the electronics realm, Conover said. “Indiana’s strength is in heavy manufacturing,” he said. “That’s been the case for 130 years.”

But Indiana has another—far less healthy—tradition, said Bob Huck, a former engineer in RCA’s computer division in Indianapolis who later managed the Electronics Manufacturing Productivity Facility, a research and development think tank in downtown Indianapolis. “The industry hasn’t enjoyed strong support here for a number of years,” he said.

Huck saw the EMPF, which was funded by a consortium of commercial electronics companies and two units of the U.S. Navy, move to Philadelphia in 1995.

“We were in a position to be an electronics hub here,” Huck said.

When electronics industry boosters approached local officials in the 1990s about bolstering the industry, Huck said, they were largely rebuffed.

“They made the decision to focus on the medical and biotechnology sectors and those sorts of things,” Huck said.

“The electronics sector started to erode. And that erosion continues to this day.”•

Please enable JavaScript to view this content.

Story Continues Below

Editor's note: You can comment on IBJ stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Please note our updated comment policy that will govern how comments are moderated.