This article was written by Josh Wright at Emsi.
Austin, Texas, is a tech-driven metro. There’s no getting around that fact. Of the major tech markets in the US, only San Jose has a higher share of tech jobs than Austin. But as our friend Brian Kelsey showed in new research, manufacturing is also a huge player in the central Texas economy.
Really, though, it’s tech-driven manufacturing that’s leading the way in Austin … and in other prominent tech economies.
Kelsey’s study, commissioned by the Austin Regional Manufacturing Association, used Emsi data to show that manufacturing is the largest contributor to regional GDP in Austin among non-government industries, comprising 10.3% of total regional gross domestic product. And productivity—as measured by value-added per worker—is more than $193,000 in manufacturing, 73% higher than productivity across all industries in Austin.
But here’s the kicker: Nearly 60% of manufacturing’s contribution to regional GDP in Austin comes from the information technology and analytical instruments cluster. The large sub-industry groups in this cluster are semiconductors ($3.1B), computers/peripherals ($2.1B), and electronic components ($721M).
So, yes, Austin is a mecca for tech-centered manufacturing. But we were curious if the same thing was true for other big tech markets, so we looked at our regional GDP numbers by detailed industry to check.
Manufacturing GRP for Large Tech Metros
Regional gross domestic product (or GRP) looks at the value-add a particularly industry brings. It includes earnings, profits generated, and tax revenue generated. And it’s a great metric to assess when analyzing basic industries (i.e., those that export products and services and thereby generate income from outside the region).
Manufacturing is a classic example of a basic industry, and for a sampling of well-known tech markets—the same nine metro areas used by Kelsey in his Austin tech talent study—the sector (mostly) plays a critical role.
While manufacturing is important to Austin’s economy, five of these top metros get a higher share of value-added from the sector. Manufacturing accounts for 27% of San Jose’s GRP and 25% of Durham-Chapel Hill’s.
(Note: We used 2014 GRP data while Kelsey’s report used 2013 data.)
San Jose’s Largest Contributors to Value-Added
San Jose is the center of Silicon Valley, so that large of a contribution from manufacturing might surprise you. However, like Austin, the bulk of value-added from manufacturing is tech-focused. Below is the top five detailed industries (6-digit NAICS) based on their share of San Jose’s total 2014 GRP.
- Internet publishing and broadcasting and web search portals (10.1% of total GRP)
- Electronic computer manufacturing (8.9%)
- Semiconductor and related computer manufacturing (7.4%)
- Software publishers (4.5%)
- Custom computer programming services (3.7%)
Only two of five largest GRP-contributing industries in San Jose–electronic computer and semiconductor and related–are in the manufacturing sector. But when paired with semiconductor machinery manufacturing, they make up 17.6% of San Jose’s gross regional product.
Durham-Chapel Hill vs. Raleigh
Just 24 miles separate Durham from Raleigh. They form a core part of the Research Triangle and share a lot of the same industry traits, but Durham-Chapel Hill is far more reliant on manufacturing.
While manufacturing jobs in Durham-Chapel Hill declined 16% from 2009-2015, the sector still employs about 10% of the metro area’s workforce and contributes a quarter of regional GDP. By comparison, manufacturing only makes up 5% of employment and 10% of GRP in Raleigh.
Durham-Chapel Hill’s five leading GRP industries give a good glimpse on what’s driving its economy:
- Pharmaceutical preparation manufacturing (10% of total GRP)
- General medical and surgical hospitals (5.6%)
- Computer terminal and other computer peripheral equipment manufacturing (5%)
- Biological product (except diagnostic) manufacturing (5%)
- Colleges, universities, and professional schools (state government) (4.4%)
Durham-Chapel Hill, home to Duke University and University of North Carolina, has a heavy biotech focus, with pharmaceutical preparation manufacturing and biological product manufacturing in the top five. Large biopharma companies in Durham-Chapel Hill include GlaxoSmithKline and Merck.
Computer and semiconductor manufacturing have a presence in Durham-Chapel Hill, but not nearly as much as in San Jose or Austin.
Raleigh, on the other hand, has some biotech (biological product manufacturing is in the top 10 in GRP), but it’s driven more by software publishers, wholesale trade, and wired telecommunications carriers.
Manufacturing’s Role in Workforce Development
Manufacturing not only makes an big dent in regional GDP, it also plays a significant role in regional workforce development. Kelsey’s report concludes with the key occupations that staff manufacturing firms in Austin and a nice section on regional workforce strategies that is applicable to almost every community and region.
With the rising cost of housing in Austin, providing as many living-wage employment opportunities as possible to local residents is an important goal for economic and workforce development, especially in areas of the region where educational attainment rates are lower compared to the population as a whole. Manufacturing should be viewed as a critical piece of the solution to many of the challenges—economic segregation and educational attainment inequality—facing Austin, and ARMA can play a pivotal role in driving public-private partnerships to address those challenges.