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.
Some Orange County companies are reinforcing operations in Asia despite business reversals at present. They’re laying the groundwork for a better future, and they’re not impatient. “It may take three or four years, but there’ll be good markets,” says Robert Kleist, president and co-founder of Printronix Inc., an Irvine-based company that makes heavy-duty printers for large computers.
And Asia is not the only area where Orange County industry is laying foundations these days. With new research centers at the University of California at Irvine and the land-owning Irvine Co. building industrial parks adjacent to the university, the county is trying to create an environment that generates new technologies and new companies.
The clear aim of county leaders, such as Irvine Co. Chairman Donald Bren and others, is to make Orange County a technological engine of Southern California as Silicon Valley has been for the northern regions of the state.
And if the Asian crisis doesn’t sink us all, Orange County could bring it off.
The county’s economy is buoyant these days. It will add 45,000 jobs, to a total of 1.27 million, this year, according to Chapman University’s latest economic forecast.
“We would have added 51,000 but the Asia crisis slowed us down,” says James Doti, Chapman president and an economist.
Exports of electronic equipment and software to Japan and South Korea have declined for the last two years. But in adversity, Orange County discovered new markets and new strengths. Exports of electronics, software, high-tech parts for automobiles and medical instruments increased sharply to Mexico and Europe. Mexico has become Orange County’s No. 1 export market.
Prosperity and success have bred a spunky atmosphere in Orange County. Printronix, for example, has a $10-million plant in Singapore that it built two years ago. Business has fallen off sharply in Indonesia, Thailand and Malaysia, says George Harwood, chief financial officer.
But the company doesn’t regret the Singapore investment, which has helped Printronix do well in China. The company 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 Costa Mesa-based, $250-million-in-sales maker of document-management software systems for business, is focusing on Japan. Despite sophistication in other aspects of industry, Japanese companies have not made great use of the information-management tools that are commonplace in U.S. industry. Smith reckons that “Japan could develop to 80% of 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. “We make products that help a country set up its communications infrastructure,” says ATL Chairman Kevin Daly. “The emerging countries of Asia, Eastern Europe and Latin America have long-term infrastructure needs.”
It should be noted that ATL and the others are not big companies. Yet they entertain global ambitions. Orange County has encouraged such bold thinking by creating a welcoming environment for small companies. Through earlier crises of the aerospace downturn and the early ‘90s recession, it became a center for small to medium-sized biomedical instrument companies and for firms that make computer services and software.
“We have 2,200 companies in Irvine Spectrum and 44,000 employees--that’s only 20 per firm on average,” says Richard Sim, head of investment properties for Irvine Co.
Such companies have rented space in the acres of two-story structures that Irvine Co. built in the last 14 years, adaptable buildings that can serve as laboratories, factories and office buildings all in one.
Now Sim and Irvine Co. are building 38 more such buildings in hopes that high-tech-oriented law and accounting and finance firms follow their clients to Irvine Spectrum. Fewer than half the buildings are leased or have prospects ready to sign so far, Sim reports. But “we’re moving ahead. The economy of this area is so diversified and the demand is so great,” he says, reflecting the confidence that one finds everywhere in Orange County today.
Still, Orange County has work to do if it is to become a truly large and global economy. Its 2.8 million people and business and political leaders must make the hard decisions about an airport. The county now lives largely off Los Angeles for air transportation.
Curiously, Orange County’s major highways have not been expanded or much improved despite years of growth of population and industry.
Some matters, however, it has attended to. The county, becoming more cosmopolitan all the time with a mix of the world’s people and a share of the world’s economy, has encouraged good schools and an entrepreneurial environment.
Thus it is attracting star-quality high-tech firms such as Broadcom Corp., a newly public company that has developed a communications processor for improved Internet access over ordinary phone lines or cable.
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, and other factors: “We needed to be in an environment with other engineering and technological companies, and 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 simply because it has laid a good foundation.
James Flanigan can be reached by e-mail at jim.flanigan@latimes.com.
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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.
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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
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Note: Figures in millions of U.S. dollars
Source: James L. Doti, Chapman University
