Yesterday Intel, the pillar of the state’s tech industry, announced their latest quarterly earnings and continued discussions on manufacturing challenges and the possibility of partnering with other firms for future production. See Mike Rogoway’s piece in The Oregonian for more.
This is something we recently discussed with our advisors as well and what it may possibly mean for not only the high-tech outlook in the state, but even the broader Portland economy. The upshot of their thinking is none of the potential changes are likely to happen overnight. What’s really a potential risk would be if, for whatever reason, the Portland region was no longer the main hub of research and development. It’s not just the direct manufacturing jobs that would be at risk, it would be all the engineering, management, office jobs and the like. To date there has been no discussion along those lines, which is encouraging. Plus the overall tech market looks to be strong in the coming years, helping support sales and activity.
With that in mind, it gives me an excuse to post a few charts on a Friday.
First, it’s always important to keep in mind that Oregon’s tech specialty has always been hardware, or tech manufacturing. The state has seen strong growth in software in the past decade, but that growth has largely matched national trends.
Second, a breakdown of tech jobs in Oregon by occupation shows that the manufacturing jobs that actually do the manufacturing, so-called production occupations, account for about 1 out of every 4 jobs. To the extent the vertically integrated business model that has served Intel (and Oregon) so well over time changes, the first impacts would potentially be felt among these jobs. That is, if the manufacturing of future chips is outsourced, one may think local production jobs would be lost. But as stated earlier, it’s really the broader cluster of occupations that comes with R&D and headquarter-type operations that accounts for the bulk of local employment.
This third chart drills down on these occupations for just Computer & Electronic Product Manufacturing, and the pure Software firms. It’s interesting to note that the manufacturers have just as many jobs in architecture and engineering, and computer and math occupations as do the local software firms. This is likely one reason Oregon does see some start-ups spin off, it’s because there is a large pool of workers with the skills and ideas to be able to do so.
Finally, just a reminder of what the outlook looks like. Our office expects tech manufacturing employment to hold relatively steady. It remains a key part of Oregon’s economy. The sector undertakes big investments every handful of years that help drive productivity gains not only in the industry but also in the statewide data. But, in keeping with the manufacturing story overall, those productivity gains do not tend to result in more employees. Or to the extent some firms are hiring, we know some of the other firms are downsizing, keeping sector employment relatively steady. The overall growth in high-tech jobs in Oregon will continue to be on the software side.
Note: this is an older, pre-COVID chart. Our office’s outlook for tech manufacturing remains relatively unchanged today, but we have seen some recent software job losses that aren’t reflected in this chart.
Mark McMullen
Josh Lehner
Oregon Office of Economic Analysis 
This is great data, Josh!
By: Randy Miller on October 23, 2020
at 9:38 AM
If tech jobs were to be lost due to outsourcing, it would be worth a brief discussion of the multiplier effect. As high paying jobs tend to support a number of other jobs (store clerks, delivery people, etc.), any significant loss of these jobs would undoubtedly have a ripple effect through the economy beyond just the immediate loss of tech jobs.
As always, your articles are filled with interesting and timely information.
By: Scott Boone on October 23, 2020
at 10:06 AM
Thanks Scott. That’s a tough one. Some standard employment multipliers for semiconductors are in the range of 3 of so, about as big as you can get. Separating that out is a bit harder. On one hand, it’s about the supply chain and how that feeds into the manufacturing process, and then how much of that is local vs national or international can be hard to pin down. On the other hand the wages paid to those production employees is not that high. Median wages are around $37,000 for production workers in tech manufacturing. The statewide median for all workers/sectors is $41,000. The high-paying jobs are the engineering, management, finance type jobs which would probably more likely to remain. You would keep the high-paying jobs, but lose the manufacturing base and associated supply chain. How that all balances out is hard to say, but it would certainly be a big negative.
By: Josh Lehner on October 23, 2020
at 12:07 PM
Josh – Enjoy reading your stuff immensely since I think you’re addressing the right things. Ex-Intel guy (do Comm RE now), I guess my biggest issue for Intel is they still make a lot of profits off the CPU chips, however, that market is no longer desktop (look at Microsoft ProX with ARM), so potential sockets are going away. However, someone had the foresight to get into cloud storage which is a big chunk of profit for them, but that biz took a hit this quarter.
On a macro scale, the high-tech biz is changing. Quietly, we’ve lost a lot (like almost all) of the hardware biz to Korea (high-end) and China (the rest), plus China has zero regard for IP protections. That’s my big vote for you-know-who compared to his comp Mr Biden who I don’t think is even aware. Lot of the well-paying manu jobs in San Jose are starting to vanish.
I guess you can hope we keep the coding jobs, but those don’t really require a BS degree, are very mobile and the investment is an office lease. When Intel builds a plant and pays $85M for a piece of eqpt, they just can’t get up and move like a software company getting bought out by some guys from Palo Alto.
Sorry for the rambling, but keep writing, I enjoy it and better yet, it makes me think.
Steve
By: Portland Apartment Sales on October 23, 2020
at 10:17 AM
Thanks Steve; appreciate the insights and the kind words. Your point about mobility and office leases is exactly what we’re worried about. Outposts and satellite offices are helping diversify and grow Oregon’s economy, and broader tech cluster. It’s good news. But it doesn’t come without risks. The challenges on the manufacturing side are what you list where being cost competitive is challenging and over time we tend to see losses, not gains, at least in terms of employment, not necessarily investment and profits. That creates challenges for us where industry level employment is the backbone of our economic models, which we then have to augment the impacts on the income side of things, not direct employment.
By: Josh Lehner on October 23, 2020
at 12:11 PM