On April 1, Freescale Semiconductor announced that the company had selected Austin, Texas, for its global headquarters, despite fierce competition from other cities around the world, including Chicago, Phoenix and Dallas-Fort Worth.
“Austin is a high-tech city with an attractive quality of life,” Michel Mayer, chairman and CEO of Freescale, said in a memo to employees. “It is an appealing environment for the innovators we need.”
Freescale, which became independent from Motorola a year ago, plans to invest about $600 million and create about 500 jobs during the next 10 years. Motorola located its first facility in Austin in 1974 and its microprocessor unit, now Freescale, has been headquartered in Austin from the beginning. The company now employs 22,000 people in 30 countries and had revenue of $5.7 billion last year.
“We have a large employee base across our three Austin locations, including manufacturing, R&D, as well as our transportation, wireless and networking businesses,” Mayer said. “And we have an attractive campus in northwest Austin that we are underutilizing.”
Austin is also the home of the University of Texas, one of the top research universities in the nation. The university provides a steady stream of top-flight engineers and scientists to companies like Freescale.
| As more companies engage in the knowledge sector of the economy, competition for highly educated workers will become even more intense. Metros with a concentration of these workers will prosper, while those that don’t, won’t. |
In March, Samsung Austin Semiconductor completed a $500 million, 34,000 square foot expansion of its Austin plant. The expansion and equipment upgrade means that the plant can produce microprocessors with features 35 percent smaller than previously.
Samsung Austin Semiconductor, established in 1996, is the company’s only semiconductor fab plant outside of South Korea.
“One of our primary motivators for moving to Austin was good, highly trained people,” said H.K. Park, president of Samsung Austin Semiconductor.
Clearly, having a well-educated work force — engineers, scientists, Ph.D.s — in proximity to a major university, with its world class faculty and buckets of R&D dollars, is a major drawing card for technology-driven companies in the Knowledge Economy.
Throughout the year, Expansion Management compares every metropolitan statistical area (MSA) in the United States according to a variety of factors important to growing companies engaged in evaluating future business locations. At various times each year, we examine health care costs, the logistics infrastructure, taxes and the impact of government, quality of life, real estate availability and costs, and public schools, to name just a few.
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n this issue, for the third straight year, we examine the college-educated work force in each of the 362 MSAs in our Knowledge Worker Quotient™. These are the human resources that knowledge-based companies most covet and, given that fact, these are the communities most likely to lead the nation in terms of growth and prosperity.
While it has become cliché to say that education is the key to prosperity, that doesn’t mean that it’s not so. In fact, our ability to produce educated people, as well as to attract them from around the world, will determine whether we maintain our position as the world’s strongest and most vibrant economy.
Some metro areas are exceptionally well placed to attract and nurture high-tech companies and entrepreneurs because of their concentration of extremely well-educated workers.
Others, with relatively low levels of educated workers, are more likely to find themselves on the outside looking in as the global knowledge economy grows during the next several decades. For those communities, the future is likely to be limited to lower-skilled, lower-paying jobs.
How We Evaluated the Metro Areas
In our opinion, the best way to get a quick feel for the relative intellectual vitality of a community is to look at its people, its higher education facilities and the amount of R&D money flowing into the university.
With that in mind, we focused our examination on the following broad categories:
Adult Education Levels Among College Graduates. We believe the education level of the adult population is far and away the most attractive asset a community offers.
In this category, we ranked MSAs according to the percentage of adults with at least a bachelor’s degree, the percentage with at least a master’s degree, the percentage with a Ph.D., and the percentage of adults possessing professional degrees. We also compared the percentage of the work force engaged in science and engineering jobs.
This information is available through a variety of sources, including the Bureau of Labor Statistics’ Occupational Employment Statistics, U.S. Census Bureau and County Business Patterns.
Medical Doctors. Although most people think of doctors simply as health care providers, they also play an extremely important role in the development of the life sciences sector of our economy. Doctors are not only users of this new technology, they are often intimately involved in its development and delivery to market. Our primary source was the Occupational Employment Statistics.
Colleges and Universities. Having a major university or, better yet, having a variety of colleges and universities, is a major asset to a community. If you look at all of the great technology centers during the past few decades, every one of them (i.e., Silicon Valley, Research Triangle, Route 128, etc.) has been built around world class universities.
Universities not only provide a steady flow of educated workers, their faculty members are also a major resource for knowledge-based companies. They also represent a major source of entrepreneurial talent.
Our primary sources in this category were Barron’s “Profiles of American Colleges, 2005 Edition,” the American Association of Community Colleges (www.aacc.nche.edu), and U.S. College Search (www.uscollegesearch.org).
R&D Spending Among Universities. The cornerstone of the knowledge economy rests in an aggressive research and development program. A good measurement for relative R&D activity at a university is to look at how much money is flowing into the university for R&D. This information is readily available from the National Science Foundation.
By going to the NSF Web site, www.nsf.gov, you can also determine, by academic discipline, how the R&D money is divided within a particular university. This enables you to better focus in on activity in your company’s particular field of interest.
What Does This Mean?
In today’s global economy, those communities positioning themselves as being low-cost alternatives for businesses looking to reduce labor costs will quickly learn they can’t possibly compete with low-wage countries like China, India or even Mexico, each of which has well-educated workers willing to work for a fraction of what U.S. workers will.
The good paying jobs, those that offer a bright future, will be found in the knowledge economy, a constantly evolving sector that relies almost entirely on innovation and entrepreneurship.
Even more challenging is the fact that the time frame between an innovative product’s introduction into the marketplace (with high profit margins) and its transition to being simply a commodity (with low profit margins) will continue to narrow. Once a product becomes a commodity, its production is almost certain to be shifted overseas — the dreaded “outsource” word.
As more companies compete in the knowledge sector of the economy, competition for highly educated workers will become even more intense. Metros with a concentration of these workers will prosper, while those that don’t, won’t.
For many communities in the United States, this is a ticking time bomb. Some won’t survive, while others will see their relative standard of living diminish.
What’s the solution? Education, starting in kindergarten and extending all the way through college and beyond. Companies will need educated workers and, if they can’t find them in the U.S., they’ll look elsewhere.
Let’s just say that we’ve received fair warning.
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