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Technology—New clusters of tech firms expected to migrate here in 2001

Thoughts of expansion , both economic expansion and the potential to occupy more carpet and cubicles , still occupy the minds of electronics and manufacturing executives as they head into 2001.

Granted, the 11th Annual San Diego Business Journal/Deloitte & Touche Economic Outlook Survey shows fewer local companies voicing a need for square footage. The number has fallen for the third straight year.

Yet Kevin Carroll, local director of the electronics trade group AeA (formerly the American Electronics Association), looks ahead to clusters of new companies, and possible expansions for Palo Alto-based Sun Microsystems, Inc. and Santa Clara-based Intel Corp.

Michael Jacobson, an Intel spokesman confirmed the company is scouting out real estate in San Diego County. He called the work “standard operating procedure” and said the company has made no decision on the matter.

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A Sun spokeswoman said the company now occupies 144,000 square feet near University Towne Centre and is planning to move into two more buildings in March and May, bringing its square footage up to 270,000.

Carroll said there is talk about other companies establishing large presences here, which in turn would draw other businesses. The just-announced California Institute for Telecommunications and Information Technology at UCSD will also create such clusters, he said.

‘Hotbed’ Of Networking, Wireless

Intel’s Jacobson said his company is attracted to San Diego because of its reputation as a “hotbed for networking and wireless communication.”

Intel bought two local companies, XLNT Networks and iPivot, Inc., in 1999. Its San Diego operation has 480 employees today.

“We will grow our business over the next few years and staff it accordingly to make it successful,” said Jacobson, who declined to say how many employees Intel could eventually have here.

Seven of 12 manufacturing and electronics executives who responded to the survey said they expected to increase their employee count in 2001. Two of those held out the possibility of increasing their head count by more than 5 percent.

Dick Palmer said the San Diego company he represents plans to go from 450 to 850 employees. Palmer is vice president for sales and marketing at Qtron, Inc., a contract manufacturing firm specializing in wireless devices and prototypes.

Eleven of the 12 survey respondents in manufacturing and electronics reported trouble in hiring qualified employees.

Engineers Hard To Find

There is no trouble getting “good, skilled assembly workers,” said Palmer. The trouble is getting engineering or materials people, he said, adding they often come from outside California and experience real estate “sticker shock.”

Hand-in-hand with the new employees, Qtron plans to move into 200,000 square feet of space in Poway in June.

Three of the 12 electronics and manufacturing executives completing the 2001 survey said they planned to expand their space. Thirty percent of the 206 respondents in all business sectors said the same thing , down from a 1998 peak of 39 percent.

None of the 12 electronics and manufacturing survey respondents said their company was considering leaving San Diego.

Yet the same survey brought some written comments saying the mix of electronics, manufacturing and San Diego is not perfect.

“As a small business owner, I am looking for a good exit strategy,” one person wrote on the survey form. The person, whose name was unavailable, expressed a desire to sell their business or just the customer base, “and get out.” He did not give a reason.

A second unidentified respondent said continually high electricity and gas prices will drive smaller firms out of business. The person expressed a concern about inflationary pressures on costs and wages.

Energy Crisis ‘Really Scary’

A representative from a small electronics manufacturer, ACCES I/O Products, Inc., called the energy crisis “really scary.”

Rick Lagrand, vice president of sales and marketing, said the crisis is not just increasing costs substantially. Brownouts could scramble data on his company’s computers, he said. He added that a sizable investment in uninterruptible power supplies may or may not avert a problem.

Yet a worldwide company like Sun sees value in staying.

Sun acquired a former Cray Research unit from Silicon Graphics roughly four years ago, said Steve Campbell, senior director of marketing for the company’s Enterprise Systems Products group. Keeping the original group in San Diego was “critical to the success of the business unit,” he said.

Now the number of employees has grown threefold to about 450, he said.

Asked whether San Diego has improved its ability to retain businesses in the past year, Campbell said he believed it has. The dozen survey participants in electronics and manufacturing were evenly divided on that issue.

Back at ACCES I/O, Lagrand said his company is getting off to a slow start but should grow by 16 percent by the end of fiscal year 2001.

Ten of the dozen electronics and manufacturing types responding to the 2001 survey predicted good business growth in the next three to five years.

Their outlook seems sunnier than that of all respondents. Seventy-six percent of 2001 respondents predicted good or excellent growth.

Such optimism seemed to have peaked last year, when 90 percent of survey respondents in all businesses predicted excellent or good growth over the next three to five years.

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