Pulling the plug: Tech sector exports declining

The high-tech industry annually brings Colorado billions of dollars in revenue and represents one of its top export products.
The sector — including computers, semiconductors, electro-medical equipment and industrial electronics — generated $2.9 billion for Colorado during 2008. That, however, was an 8 percent decrease from 2007 and far off the 2006 high of $4.3 billion.
So, while the state ranks 20th in the nation for high-tech exports to foreign countries, that ranking could be in jeopardy.
“Part of it is the recession,” said Josh James, director of research and industry analysis at TechAmerica. “And part of it is that companies are moving overseas, to other states, where it’s cheaper to do business.”
Tech export totals usually are about the same as export totals in other manufacturing areas, he said. But during this recession, manufacturing exports dropped 22 percent, while high-tech exports only dropped 20 percent.
“So tech exports are doing slightly better — and this is good news for Colorado, because the state depends so much on that sector of the economy,” James said. “The state saw a loss, and that’s troubling. But it tracks with the rest of the nation. There’s no reason to believe that the numbers will stay down, but there will be flattening in the next year.”

Local investment

Colorado should be doing more to grow high-tech businesses, said Dr. Michael Larson, associate vice chancellor for research and the El Pomar Chair of Engineering and Innovation at the University of Colorado at Colorado Springs.
“Possibly the federal government and the state could do something to bolster output to drive need,” Larson said. “But it’s complicated. The weak economy could lead to a weak dollar, driving up demand, but other nations artificially change their currency to keep demand for their goods up.”
And Colorado doesn’t have the best track record in picking high-tech winners, Larson said. While it does try to provide incentives for companies, it doesn’t have a guaranteed method to pick companies that will both succeed and stay in the state.
“If there was a way they could pick them better, I’d be all for financial incentives,” he said. “I do think there is a place for both federal and state money.”
But Larson believes a better way to grow the high-tech sector is to create technology locally — and transfer that technology to private companies. However, he admits that is hard to do during the current economic climate.
“Angel investing and venture capital is down in the state and in the nation,” Larson said. “And it’s a bad time for that to happen. Research shows that you get more bang for the buck if you invest in small, start-up technologies, rather than in big companies spending more money in research and development.”
A Harvard Business School report shows that every dollar in venture capital funding for technology produces the same results as every $3 spent for research and development in large companies.
“It makes sense to find investment for these small, local companies that have exceptional technology,” he said. “You get more for your investment. We just need to have the credit market loosen a bit so people can start investing in new technologies.”
Larson said the only way to grow is through innovation, new ideas and new companies.
“If we don’t come up with something new, we’ll stagnate,” he said. “Enterprise spurs innovation, and that leads to growth in output.”

States:

  • California was the leading exporter at $49.3 billion.
  • Texas exports were $39.8 billion, up 0.3 percent, and remains the second largest cyberstate.
  • A total of 36 states saw exports increase. The fastest growing cyberstates were Montana, Utah the District of Columbia, New Hampshire and Louisiana.
  • Vermont had the highest concentration of tech exports, with 70 percent of exports coming from the tech industry. High-tech accounted for more than 50 percent of exports in New Mexico and Idaho.
  • Tennessee was the second largest exporter of electro-medical equipment, after California, and Florida was the second largest exporter of photonics.

Colorado:

  • Tech exports: $2.9 billion, total exports $7.7 billion
  • Tech as a percentage of total exports: 37 percent
  • High tech employs 17,300 people.
  • Colorado ranks 20th in high-tech exports and seventh in export concentrations.
  • Leading export sectors: computers, semiconductors, industrial electronics, electro-medical equipment and communications equipment.
  • The state exports most goods to Canada, followed by Mexico, the Philippines, Malaysia and China.

Source: TechAmerica Foundation