The state of California is transforming from a manufacturing-based economy to a knowledge-based economy. So says a new report that analyzed the state's research and development spending in order to track the future of its economy.

The report - funded by the California Technology, Trade and Commerce Agency's (TTCA) Division of Science, Technology and Innovation (DSTI) and the San Diego Regional Technology Alliance - analyzed the state on a county-by-county basis in order to help state and local leaders determine which types of new technology will develop in each individual region of the state.

With change occurring so rapidly, California policy-makers need to know the direction in which their economies (note the plural) are heading. As the fifth largest economy in the world, and the No. 1 recipient of federal research and development funding ($44 billion, 20 percent of the national total), California is too large and complex to be analyzed as a single entity. That's why the state has broken itself down into individual regions. Each region is recognized as having its own unique strengths and economic character. Leading the campaign to maintain California's leadership in the new economy is TeamCalifornia, a consortium of economic development professionals, and state and regional decision makers.

A Satisfied Customer

In the Sacramento region, for example, SV Probe Inc. recently decided to locate a new semiconductor test device manufacturing facility. The company will hire 80 people, some of whom will also conduct research and product development activities. The high-tech manufacturer tripled its manufacturing capacity when it opened a facility in San Jose three years ago. Its choice of a California site was based largely on its satisfaction with San Jose.

"SV Probe has experienced explosive growth during this past year," said Kevin Kurtz, chief executive officer of SV Probe. "Sacramento was an ideal location because of its affordability, proximity to our headquarters, existence of several customers and potential suppliers already in the region, and the quality of life for our employees."

Farther south, the Bay area is home to the University of California Berkeley, where TTCA recently opened a new high-tech Internet research facility. Dubbed Net21, the facility will help companies be more innovative and productive. It developed out of the Next Generation Internet (NGI) program, which is designed to provide California companies with the funding and technical assistance necessary to develop and commercialize new Internet applications. NGI is expected to create 1,000 high-tech jobs during the next five years.

Farther south, in the Los Angeles region, the state of California and Los Angeles County are developing a biotechnology research park near the University of Southern California's Health Sciences campus.

The park will be designed to foster the research, development, and commercialization of biotechnology.

It will house incubation facilities for start-up and established companies, which will work toward brining to market new, innovative uses for biotechnology products.

Work Force Plays a Role

In the Upstate California region, Tehama County attracted high-tech investment with its pro-business attitude and available work force. AlphaSmart and Intelegy are two Silicon Valley technology companies that are expanding into the Red Bluff/Tehama County area. AlphaSmart, an education technology developer, is a client of Intelegy, a contract-marketing firm.

The San Diego region has been - and will continue to be - home to Gateway's headquarters, thanks to the efforts of local officials. The computer company needed to expand its facility and found the necessary space in the Parkway Business Center in Poway.

Gateway was motivated to stay in San Diego because of the area's available high-tech work force.

"Gateway has aggressive plans for the future," company Chairman Ted Waitt said. "We need the best people to help us make that happen. San Diego has a highly educated technical work force and an environment that will ensure we continue building a world-class team."

Manufacturing is still alive and well in California, and as companies that are investing in the new California economy prove, the manufacturing and high-tech sectors are not mutually exclusive.

Manufacturers have become so high-tech that they now seek out specialized workers in California's knowledge-based economy.

Take Lucent Technologies Microelectronics Group. This communications semiconductor company invested $40 million to expand its San Gabriel Valley manufacturing facility and hire 450 new people.

The expansion included the construction of a new 20,000 square foot state-of-the-art wafer fabrication and testing facility in Irwindale, the renovation of an existing 166,000 square foot administrative building in Irwindale, and the renovation of a 104,000 square foot manufacturing facility in Alhambra. Southern California's base of high-tech workers contributed to the decision to expand there.

Tokyo-based Dai Nippon Printing Co. invested $16.1 million to establish a new manufacturing facility in an existing 90,000 square foot building in Chula Vista.

The display screen manufacturer hired 90 people to produce screens for rear projection televisions.

Significant factors in the decision to locate in Chula Vista included its proximity to Dai Nippon customers in the Maquiladora area, a good work force, and support from the California Technology, Trade and Commerce Agency and Chula Vista, said Masanori Sakoda, president of Dai Nippon Printing Electronics America LLC.

Another Japanese company, Fuel Total Systems California Corp., a wholly owned subsidiary of the Japan-based FTS Co., invested $10 million to build a new 120,000 square foot facility in the Central Valley community of Lathrop. The company will hire 70 people to help manufacture fuel tanks and fuel delivery systems.

The Experience Factor

California's pool of high-tech workers is filled with specialists, including aviation experts who have retired from the military. BAE Systems is capitalizing on that. The systems, defense and aerospace company opened a new civil aircraft modification, maintenance and repair facility at the Southern California Logistics Airport (SCLA) in Victorville. The new facility will become a major North American hub for commercial passenger aircraft. It will provide maintenance, refurbishment, modification and conversion services.

"BAE Systems is a truly global company that provides excellence to our customers, and to do that we need excellent facilities and an excellent professional work force," said Jim Modig, president of BAE System Flight Systems. "We have found that excellent facility at SCLA and equally excellent employee potential through and around the city of Victorville."

The SCLA, a 5,000 acre multi-modal business complex with a dedicated airport, is the former George Air Force Base, and many aviation professionals remained in the Victorville area after the base closing.

This pool of qualified aviation workers was one reason BAE said it chose the site.

Other factors included the airport's expansion space and extensive infrastructure.

California's technologically savvy aerospace work force also helped the state outbid Florida, Texas and Missouri to land the Joint Strike Fighter (JSF) project, the largest defense contract in U.S. history.

Northrup Grumman recently announced its plan to assemble aircraft components for the JSF in Palmdale, and expand its El Segundo JSF development and manufacturing facility.

Public Helps Private Sector

State and local entities throughout California are initiating innovative programs designed to spur high-tech economic growth.

The California Infrastructure and Economic Development Bank sold $130 million in 501(c)(3) revenue bonds to help the RAND Corp. build a new headquarters building in Santa Monica. The 309,000 square foot headquarters will house 1,100 employees.

RAND is a non-profit think tank that increases understanding in the fields of science, education and charitable work.

It has a history of creating business and scientific innovations that lead to commercially viable products. RAND work served as the foundation for one of the earliest computers, as well as much of today's Internet technology.

State and federal officials met in the San Joaquin Valley recently to identify the region's future technology needs. The Connecting to Compete forum was funded partially by a $4 million investment from the state's Rural E-Commerce Grant program, which finances projects that create innovative ways for rural areas to access and use advanced telecommunications services.

Also in San Joaquin Valley, the Regional Technology Alliance (RTA) recently received a $200,000 California Technology Investment Partnership matching grant to help create new technology-based businesses. Also receiving a $200,000 grant recently were the Inland Empire and Capital regions of the state.

Naturally, California communities are still considered unique for a number of reasons and each one still attracts investment with those qualities. Upstate California, for example, long known for its quality of life and abundant wood resources, is still attracting companies for those two reasons.

Baskins Forest Products, for example, opened a manufacturing plant in Redding, where it designs, manufactures, and distributes millwork products.

"Not only is Shasta County a central location for my business, but the recreation opportunities are endless and it's a great place to raise my family," said Rich Baskins, president of Baskins Forest Products.

The Sacramento region is known for its progressive attitude toward the environment.

The Schott Applied Power Corp., an independent distributor of solar energy systems, moved its national headquarters to Rocklin, in the Sacramento region.

"California is the biggest single market for solar electric components in the country, and Sacramento is known as photovoltaic 'headquarters,'" said Stephan Hansen, Schott's chief operating officer. "There is a lot of activity here to promote alternative energies; consequently, a lot of companies have subsidiaries in the area. We decided we wanted to be here in Rocklin."

Schott Applied Power moved into a 23,000 square foot facility in the Rocklin Ranch Industrial Park, where it employs 32 people.

In a state as diverse as California, regionality is key. One simply cannot characterize this state in one or two quick phrases. But one can say that underlying each region is a commitment to embracing technology, advancing knowledge and creating new, innovative commercial applications for useful products.

Ann Morris is a freelance business writer in Leawood, Kan.