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June 2007

High Tech a Global Boon for Texas
State Reaps the Benefits of International Markets for Computers, Electronics

By Bruce Wright

Perhaps no other statistic so fully conveys the changes Texas has seen in the last half-century: in 2006, the state’s biggest export commodity wasn’t oil and gas, cotton, cattle or the other traditional mainstays. It was computers and electronic components.

From the telecommunications cluster of Dallas-Fort Worth to the Silicon Prairie around Austin — and elsewhere around the state — Texans are making high-tech products that are sold all over the world. Last year, the state exported nearly $35.2 billion worth. And those sales support thousands of Texas jobs.

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High Tech, Texas-Bred

Texas has bragging rights as the birthplace of high tech since Texas Instruments’ legendary scientist Jack Kilby invented the integrated circuit — now commonly called a computer chip — in Dallas in 1958. Kilby’s prototype initiated a technological revolution that changed virtually every facet of our daily lives. Worldwide sales of integrated circuits totaled $209.5 billion in 2006, according to Advanced Forecasting, an industry analysis group.

Today, more than 116,000 Texans work in the manufacture of computers, telecommunications equipment and other electronics, according to the Texas Governor’s Business and Industry Data Center (BIDC). Major employers include firms such as Texas Instruments, HP, Dell Computers, Freescale Semiconductors, Samsung and Advanced Micro Devices.

Much of their success hinges on international markets, and business is good: BIDCreports that the state’s exports of computers and electronics surged ahead nearly 13 percent in 2006.

Across the Border

More than a third of all Texas exports go to Mexico, and electronics are an important part of the mix, both finished consumer products and components for Mexico’s own burgeoning high-tech industries.

“Guadalajara is a big semiconductor site, it’s like the Mexican Silicon Valley,” said Adriana Cruz, vice president for Corporate Recruitment for the Greater Austin Chamber of Commerce. “HP and some of the other big names have operations there. You have a lot of computer companies there doing assembly work, and so some components from [Texas] go there for assembly, and then they go further into Latin America.”

And other products come right back into the state. “We export many [electronic] components to firms in Mexico and elsewhere in Latin America that are then re-imported into the states [as finished products],” said Dr. Bruce Kellison of the University of Texas’ Bureau of Business Research.

Around the World and Back Again

But that’s the nature of a truly global economy: items may pass though multiple nations, gaining value each time. “Companies like Samsung — the [computer] chips that they manufacture here in Austin are put on a truck and then on a plane in Dallas, and then they go out to Korea,” Cruz said. “And then, in Korea, they’re put into phones, TVs, computers or whatever, and then they may be sent back to the states.”

Meanwhile, the expansion of Asian nations is opening major new markets for Texas goods. Dell and HP are benefiting from aggressive demand for computers, for instance. “The PCgrowth rate in a country like India is 20 to 25 percent, year over year — every year it’s growing at about twice the worldwide rate,” said Raj Shah, managing director for Finovant, an Austin-based strategic advisory company serving the technology industry.

Demand is riding high for other electronics as well. “The automotive industry is booming in India and China,” Shah said. “Almost every major automotive manufacturer is setting up shop there. And companies like Texas Instruments have entire businesses that sell automotive processors, the kind that show up on your dashboard. That’s another big factor. As these auto sectors grow dramatically, folks like Texas Instruments benefit, [selling] specialty chips and other components that are designed and manufactured in Texas.”

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Global Reach Benefits Texas

The global reach of Texas electronics is good news for Texas, Kellison said. “It’s an excellent indicator that the Texas economy is further diversifying away from low-value-added to high-value-added exports. It’s very encouraging. We like to see electronics and other high-value-added materials going out of the state.

“It means that the Texas economy is functioning at a higher level. Texas workers are more productive, and manufacturing is moving into high tech and away from traditional areas. It means the Texas educational system is doing its job and working hard to educate Texans to work in manufacturing plants that can make high-tech goods for export,” he said.

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