Can High-Tech Manufacturing Stay In The Bay State?
Conventional wisdom holds that traditional factories are dead in Central Massachusetts, and if the area wants to compete it must look to high-tech manufacturing. But recent developments at two local companies point to the ways that high-tech industries can be just as vulnerable as the rest of the production economy.
In August, Westborough battery maker Boston Power Inc. canceled plans for a 600-job plant in Auburn after it failed to win a $100 million grant from the U.S. Department of Energy. And, earlier this month, executives at Marlborough-based Evergreen Solar Inc. announced that the company will cut jobs at its new Devens facility thanks to declining prices for solar panels and increased competition.
In both cases, one of the key issues is competition from China.
Evergreen Solar is moving assembly of its solar panels to China, while continuing to build solar cells at its Devens plant. Currently, the site employs 600 to 700 full-time workers and 200 to 300 temporary workers hired through an agency, according to spokesman Chris Lawson. The company already closed its pilot plant in Marlborough at the end of last year, and it recently opened a new factory in China.
“Fundamentally, the question that the United States has to reflect on is, can any manufacturer here really be cost-competitive with countries like China where the labor rates are so much more reduced?” he said.
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China also plays another role in Evergreen’s dilemma, according to Barry Bluestone, director of the Northeastern University Dukakis Center for Urban and Regional Policy and an expert in manufacturing.
“Evergreen’s problem, which is true of solar everywhere in the country, is that the Chinese government has chosen to target that industry as basically a growth industry for themselves,” he said.
That means offering subsidies to the competitors of U.S. companies and giving firms from all over the world support to expand their production in China.
Christina Lampe-Onnerud, CEO of Boston Power, said labor is such a small part of Boston Power’s costs that cheap labor didn’t really play a role in the decision not to set up shop in Massachusetts. But she said government subsidies matter a great deal.
Lampe-Onnerud said other countries, including China, are offering appealing capital offsets to help pay for the $100 to $200 million cost of setting up a battery plant. She said the company simply can’t afford to set up a factory in the U.S. if it doesn’t get a similar deal.
“So we’re shipping 600 great jobs to China,” she said. “It’s not possible for us to deploy a plant without government support.”
Given the obvious advantages of manufacturing elsewhere, a better question than why companies move operations overseas might be why they locate them in Massachusetts at all. For high-tech companies, the reason is often the state’s abundance of research facilities and highly educated workers.
Lawson said Evergreen opened up shop in the state largely because its cutting-edge method of making solar “string-ribbon” wafers was born here.
“That was very new technology for us, developed in Marlborough,” he said. “Having that close to home was very important to us so that we could keep that close to us.”
Lawson said the cost of producing solar panels in the state wouldn’t have been an issue had it not been for an unexpected 34 percent drop in the price of the panels that has battered all solar companies.
Lampe-Onnerud said Boston Power had hoped to set up manufacturing in Auburn to keep its research and development staff in close contact with production. Putting plants in China forces employees to spend big chunks of time flying around the world, she said.
“I think if you can combine R&D with manufacturing you have a much stronger company,” she said. “This is a business where you have to be there in person.”
In some cases, the advantages of the high-tech, educated Massachusetts landscape outweigh other issues. Multinational pharmaceutical company Bristol-Myers Squibb chose Devens for a major biologics manufacturing facility partly because of generous support from the state, but also because of the access to an established biotech cluster with an educated workforce, according to spokeswoman Linda Jordan.
Jordan said about a third of workers at the plant, which is now preparing for full-scale production and has about 250 employees on board so far, are highly educated professionals. The other two-thirds are process operators and lab technicians, who also have specialized training. The jobs involve technical processes like fermentation validation and quality control, and many require associate’s or bachelor’s degrees.
But high-tech products and high-tech production methods don’t always go together. At Evergreen, Lawson said, most jobs require only a high school degree, and workers can be trained when they start. In contrast, Bluestone said, many low-tech products are built in facilities that are mostly automated, where employees need advanced training to run the computer systems.
“Many of the companies in this state that are in manufacturing are producing what we would think of as pretty normal manufacturing products, but they’re doing it in very sophisticated ways,” he said.
Ultimately, Bluestone said, producers of both high- and low-tech products face many of the same issues in deciding whether to locate facilities in Massachusetts or somewhere else in the world. One of the biggest is the value of the dollar, which is currently quite weak compared to other major world currencies.
“From the point of view of manufacturers, this is a godsend,” Bluestone said.
He said another important factor that keeps many manufacturers in Massachusetts is having good supply chains and customer relations with other companies in the region. In a 2008 study, Bluestone and his colleagues asked a sample of the state’s manufacturers what has kept them in business, and the ability to serve customers was the most popular choice.
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