Closing of Suss MicroTec a dark spot as Vermont high-tech shows gains

By Art Edelstein, Vermont Business Magazine -- Vermont s computer and related electrical machinery manufacturing sector, dominated as it is by IBM in Essex Jct, is rebounding from the recession and sees some positive signs for the near future. The notable loss is the closing of Suss MicroTec, a stalwart of the state's high-tech seen. Upwards of 100 jobs will be lost at the Waterbury manufacturer.
IBM itself hired more than 200 workers for its manufacturing plant last year and is in the process of filling an additional 100 jobs since April.
These are full-time, long-term supplemental positions for both day and night shifts with benefits, said Big Blue spokesman Jeff Couture. Thirty to 40 positions remain to be filled.
Couture said the recent hirings reflect increased customer demand for the products and technology from the IBM Vermont facility. The facility designs and manufactures semiconductor chips for a wide range of consumer electronics products, including cell phones, TVs, digital video recorders, GPS systems, and is used in the communications networking equipment that supports them. Right now demand is strong, particularly reflecting the growth in the mobile Internet -- portable devices using the network for video, text, web browsing, phone and more, says Couture.
As of April, the latest figures available, 7400 Vermonters were employed in computer and related electrical machinery manufacturing, which is down from 7900 a year ago. This six percent decline reflects national levels of decline in this industry, said Department of Labor market statistician Tom Douse. One caveat is that IBM owns the lion s share of employees in this category, somewhere over 80 percent of the workers in Vermont.
The industry does have a high average wage of $77,000 annually, which is nearly twice the average for all industries in the state. This manufacturing category, according to Douse, represents a quarter all Vermont manufacturing.
This is a very important part of Vermont s economy, Douse emphasized. We have seen some long term declines here and nationally as we compete with overseas. But we still expect it to be a major part of the Vermont economy.
The overall picture of computer-related manufacturing is a complicated one, said Dick Heaps at Northern Economic Consulting.
The best stance for a US and Vermont company in this field is to get involved in the manufacture of very specialized equipment. Having manufacturing near the people who do the development is good but once the product becomes standardized and a commodity the production moves to Asia. Firms that are successful here must be constantly innovating to keep production here but this is limited, he explained.
At 7,400 jobs, he categorized this sector as a very small part of our overall economy.
In analyzing job numbers for computer and electronic manufacturing here Heaps said that other than IBM it was a small sector in Vermont and a good paying sector. As part of the world economy he sees an extremely competitive type of industry.
Heaps estimated that outside of the jobs at IBM there were perhaps 2500 other positions in the state in this industry. While that is important and a good number it is very small, he cautioned.
Heaps said food manufacturing is a much large job sector but these are much lower paying positions. However, he said the state should continue to nurture computer manufacturing. He sees this industry changing as the horizon for planning and operations is about six months and they have to remain nimble. It s a very competitive and fast moving industry.
Evidence that the high tech sector is starting to rebound is seen in a growing number of orders. The bad days are over, he predicted.
One example of this is the rehires at VEMAS (Vermont ElectroMechanical Assembly Services) in Poultney. Owner Jon Leber says he has just hired two people, the first such hires in three years. While small in number, this represents the kind of positive turnabout in this industry.
VEMAS assembles printed circuit boards, cables, and does system integration for the industry, which includes medical companies and the military. Sales last year were $5 million and the company has 40 employees.
Sparking the modest recovery, says Leber is, business coming back from China. He attributes this to a 20 percent rise in Chinese labor rates and communication issues with Asia as well as the distance factor.
The future is hopeful, says Leber. We re here for the long haul and have to weather the storm.
If he has any complaint with Vermont it is that the state is not doing enough advertising for its current manufacturing base, and tends to put its marketing dollars into getting companies to relocate here. They should concentrate on what is already here he contends.
SB Electronic in Barre, a company that builds capacitors, is building a new plant in Barre Town Industrial Park. This move is the result of a $9 million grant from the US Department of Energy.
SB Electronics is gearing up to build capacitors for the Chevy VOLT, GM s highly touted electric/gas vehicle. The company will build part of the power train located in the inverter, which will take DC current from the battery and convert it to AC power for the electric motor that turns the wheels.
The new plant will be 53,000 square feet and open next January. Under the grant the company will provide power ring capacitors for electric vehicles. We will hopefully working with a number of original equipment manufacturers like Ford and GM, said spokesman Brad Gordon.
Through this grant we are contracted to provide capacitors for 100,000 electric vehicles by the end of 2012. The company will manufacture 200,000 to 300,000 capacitors per year. Gordon said the goal of DOE is to have one million electric vehicles on the road in the next decade.
The boost to the company s workload has grown the workforce here from 50 to 73. The company could add an additional 130 employees within the next five years. Manufacturing sector jobs here average over $12.90 and starting wage is $12.92 with benefits.
As a result of the job creation the company has had hundreds of resumes come in and DOL has helped with screening.
SB Electronics is the only Vermont company involved in this grant and one of just two nationally.
This project, making these specific capacitors, said Gordon, was slated to be moved to China because we couldn t produce this part cost effectively in our current location. The engineering would have stayed in Barre. With the grant sponsored by ARRA funds, it allowed us to keep the project here in Vermont.
Gordon said the company could expand its product outside the US as there
is a large market in Europe and Asia.
The future could be very rosy and currently there is a plan, if growth continues, for a phase two addition of 47,000 square feet of manufacturing space that would bring the facility to 100,000 square feet at the Wilson Park. If the optimism holds the company would increase its employee capacity to 300 to 500 employees.
This ARRA money has a real impact throughout the supply chain nationally. There has been a real trickle down effect, said Gordon.
Another firm doing will is Logic Supply in So. Burlington. It builds embedded computers. These are small computers embedded into a bigger application. They can be perhaps 6x6 inches and an inch deep but with more processing power than a desktop. As such they are CPUs without a display. This is hardware to help run other people s applications such as running a digital display in a mobile kiosk, or a digital display for advertising purposes, or a public transportation terminal. Each is a customized computer system.
The company currently employs 30 in its assembly division and is growing, says Mark Heyman in the human resource office. Logic Supply employs software developers, assemblers and a growing sales team. Sales to consumers comprise just 10 to 20 percent of business the rest is business-to-business sales.
We are in the small form factor market (SFF) that provides a small footprint PC that has low power consumption, said Joe Kelly in sales and marketing. The company supplies its computers for mobile applications like a police car, ambulance, or taxi where riders can pay by credit card, read advertising on the display, see the GPS and even make a reservation at a restaurant. These systems cost $500 to $1000.
Pushing this company s growth is the surge in mobile computing. Digital signage as in workplace communications screens providing company information is a big sector to exploit said Kelly.
Sales here are good. The company started in 2003 and sales now are $12 million with very high growth expectations. The export percentage is small however, as most business is in the US with 10 percent going to Canada.
Components for these embedded computers come from Asia. In order to be successful in this industry says Kelly, you need a strong relationship with suppliers. Logic Supply as an office in Taiwan.
The future looks good with aggressive growth goals. Kelly predicts PCs will be utilized in many places, and the prices, size and power consumption of the embedded models produced here have dropped greatly.
After a recession that saw consumer sales increase but corporate sales drop slightly, Logic Supply has begun to see an increase in sales this spring. Kelly thinks June will be a record sales month.
A recent dark spot in what appears to be an otherwise healthy sector is the announcement of Suss MicroTec in Waterbury in early June that it was closing its doors and shipping jobs to its San Jose, CA, facility and Germany where it is based.
The company builds the equipment that is used to make computer chips, explained Ginny Champney the director of Human Resources.
Between 80 and 100 jobs have been put in jeopardy with the announcement. These jobs have a salary range of $25,000 to over $100,000.
The plant will close within the next seven to nine months. According to Champney, the majority of employees have jobs through year s end with the likelihood of an extension into 2011.
Some of the workers may wind up in California as they have been offered alternative employment. The bulk of the technical people, said Champney, have been offered temporary and full time positions in Germany.
A handful of positions will remain in Vermont as 15 people who are service engineers, software development engineers, and technical support sales staff have been offered positions and can work out of their homes.
Suss MicroTec has had a Vermont presence since 1980 and occupies 33,000 square feet of plant space. The decision to leave Waterbury, said Champney, was based on the age and size of the facility.
This product line has tremendous potential. It needs to be used in all processes of making computer chips but our facility can t meet those production requirements. We are not an up to date facility and don t have the space capacity. We have a plant in Germany that is large enough to meet the growth forecast for this product and it is up to date.
While the plant closing is a blow to the workers and the community, Champney said the company was trying to ease the closure. We ve given the workers a long lead time to think about what to do, and a good severance package I hope this will soften their change.
Source: Vermont Business Magazine. June 16, 2010