Orange County’s Got a Reason to Feel Confident
Orange County’s response to the Asia crisis may be the right one: Keep on investing and look ahead to the day when the crisis is over and business gets good again.
That’s what some Orange County high-tech companies are doing these days--investing in Asia despite gloomy prospects at present.
And their investments abroad only mirror strong investments at home. Orange County right now is in a time of growing confidence in its future. If the global economy can avoid a major downturn in the near future, this time will be remembered for the emergence of Orange County’s economy to a new level of success.
The major land-owning Irvine Co. typifies the expansive spirit. It is putting up 38 new two-story office buildings in hopes that tenants will be there to lease the space. Fewer than half the buildings are leased or have prospects ready to sign at present, reports Richard Sim, head of investment properties for Irvine. But “we’re moving ahead. The economy of this area is so diversified and the demand is so great,” Sim says.
The county’s economy will add 45,000 jobs, to a total of 1.27 million, this year, according to Chapman University’s economic forecast. “We would have added 51,000, but the Asia crisis slowed us down,” says James Doti, Chapman president and an economist.
The county’s exports of electronic equipment and software to Japan and South Korea have declined for the past two years. But a surge in exports of such high-tech gear to Mexico have taken up the slack and made that country Orange County’s No. 1 export market.
That underlines Sim’s point about diversity. Orange County, a thriving center for biomedical and medical instrument companies, is becoming a home for computer service and software companies. Such firms with products that make industry more efficient have potential markets stretching from Eastern Europe to Latin America to the now-struggling countries of Asia.
Indeed, Orange County may become the technological engine of Southern California as Silicon Valley has been for the northern regions of the state.
That seems to be the status the county of 2.8 million people is reaching for. UC Irvine is building research centers for biotechnology and computer sciences while the Irvine Company leases premises to high-tech firms on adjacent land.
The idea is to foster cooperation between the university and companies that will lead to development of new companies and discoveries.
Most universities are trying similar outreach efforts, but UC Irvine may have an advantage. Orange County has the attractions of available land, reasonable housing prices (at least, as compared to the Westside and Silicon Valley), good schools for the children of the high-tech employees, and a rich environment that encourages entrepreneurs to think expansively.
There is a spunky atmosphere in Orange County these days. Printronix, for example, an Irvine-based maker of printers for heavy duty computers, has a $10-million plant in Singapore that it built two years ago. Printronix’s business has fallen off in Indonesia, Thailand and Malaysia, says president and co-founder Robert Kleist.
But it doesn’t regret the Singapore investment. Printronix is doing well in China just because it can send Mandarin-speaking engineers from Singapore to help its customers.
“We’re targeting China and South Korea as growth markets,” Kleist says, although the company’s business in Korea has been devastated in the crisis.
Similarly, Theodore Smith, chairman of Filenet, a $250-million maker of document management software systems for business, is focusing on Japan. Despite sophistication in other aspects of industry, Japanese companies have not used the computing and information management tools that are commonplace in U.S. industry. Smith reckons “Japan could develop to 80% as much as the U.S. market.” So it’s worth investing in operations now to be ready when the economy changes.
ATL Products, a $150-million maker of data storage products, also is using the Asian downturn to send out new people and establish a presence in the region. In addition, Irvine-based ATL is moving its engineering and administrative staffs to new quarters next to the UC Irvine campus, in hopes of benefiting from a give-and-take with academe.
Still Dick Sim of Irvine knows that. In 14 years of developing the Irvine Ranch, he has seen crises come and go, from the post- Cold War downturn of aerospace to the Orange County bankruptcy. The aerospace downturn “did us a favor by freeing up engineers to come here and start new companies,” Sim says. And the 1994 bankruptcy didn’t cause even a pause in the county’s economic progress.
The strength of the county’s economy has been the thousands of small to medium-sized companies inhabiting two-story structures that can serve as laboratories, factories and office buildings all in one. Such buildings, whether in Irvine or up north in Silicon Valley, are particularly suited to modern high-tech companies. That’s one reason Sim is confident about building more of them.
Orange County is attracting star-quality high tech firms such as Broadcom, a newly public company that has developed a communications processor that allows improved Internet access over ordinary phone lines.
Broadcom, like most residents of Orange County, is a transplant. It started in 1991 near UCLA, where co-founders Henry Samueli and Henry Nicholas were engineering professor and doctoral candidate, respectively.
Why did it move to Orange County? There was space available to build a company, Nicholas explains, as well as other factors: “We need to be in an environment with other engineering and technological companies, and because it’s a good place to live and raise kids. The schools are good, and that’s important because we need to attract skilled people from all over the U.S. and the world.”
Maybe Orange County is confident in a worrisome time because it has laid a good foundation.
James Flanigan can be reached by e-mail at firstname.lastname@example.org.
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South of the Border
The Asian crisis has reduced Orange County’s exports to Japan and South Korea, but a surprising surge in orders from Mexico for computer and electronics products has made it the county’s No. 1 export market.
Country Q1 ’96 Q1 ’97 Q1 ’98 % chg. Q1 ’96-'98 Mexico $268 $324 $415 +54.9% Canada 288 283 298 +3.5 Japan 384 363 319 --16.9 Singapore 94 80 72 --23.4 South Korea 142 114 63 --55.6
Note: Figures in millions of U.S. dollars
Source: James L. Doti, Chapman University