Technology leaders predict rosy future for Oregon

By AVIVA L. BRANDT

Associated Press Writer

PORTLAND, Ore. (AP) _ The Silicon Forest is going to get bigger.

High-tech companies in Oregon expect to add 25,000 jobs by 2002, boosting overall technology employment by more than a third in a state that has come to depend more on computer chips than timber to drive its economy.

The forecast was released Tuesday in the sixth annual Oregon Technology Benchmarks study, completed in May by The Oregon Council of the American Electronics Association and the Portland office of KPMG, an accounting firm.

The results of this year's benchmark study were based on responses from 72 companies that represent about 45 percent of Oregon's technology work force.

The study doesn't capture trends at many small companies and startups, but it has proven to be an accurate gauge of the sector's health and prospects, said Les Fahey, a partner at KPMG who coordinated the survey.

During his report to nearly 300 industry executives at Tuesday's conference, Fahey said high-tech companies must keep developing new technology in order to grow. The study showed 63 percent of high-tech revenues came from products less than 2 years old.

"The message is clear _ high-tech companies need to continue to innovate or they'll die," Fahey said.

Technology companies _ mostly computers and electronics _ accounted for almost half of Oregon's exports and generated a $4.5 billion payroll in 1999.

High-tech revenues increased 4.7 percent, from $21 billion to $22 billion, according to state figures. Employment grew 2 percent to 72,600 total employees.

But overall, Fahey said, Oregon's high-tech industry had only modest growth in 1999 as the Asian economy recovered from its 1998 financial crisis and the Federal Reserve attempted to control inflation by increasing interest rates.

Both hardware and software companies are growing to meet robust demand from the communications industry and e-commerce developers.

Oregon's smaller entrepreneurial companies were a bright spot, particularly in the software industry, helping to offset the slower growth rate among larger manufacturing companies.

The industry growth has spawned its own problems, including a shortage of engineers and other professionals.

"The No. 1 issue today is the same one it's been forever _ it's people," said Don VanLuvanee, president and chief executive officer for Electro Scientific Industries.

Bob DeKoning, president of Decision Point Systems, agreed.

"We all face problems with a lack of engineers. That's well known. Management talent is also key," DeKoning said. "I think eventually there will be a war on talent for hourly workers."

Fahey said the shortage has led high-tech companies to "cannibalize" each other, recruiting from other Oregon high-tech companies.

"This has an impact of helping to drive our wage rates up," Fahey said.

The average high-tech wage in the state was almost $61,000 in 1999, up 12 percent from the previous year and almost double the average manufacturing wage. More than 60 percent of the surveyed companies are providing stock options.

In a comparison with five other Western states with high-tech industries of similar size, Oregon placed first in the growth of high-tech employment, venture-capital investments and exports from 1993 to 1998. It ranked last, however, in the growth of state spending on higher education and in state high-tech degrees granted.

"We're starting to make some progress," Fahey said, citing last year's 18 percent spending increase for higher education in Oregon for a total budget of $860 million.