The bad news at Eastern Henrico chip-maker Qimonda shows once again how important it is that Greater Richmond do a better job of recruiting sustainable companies.
German-owned Qimonda, formerly Infineon, announced yesterday that it will lay off 1,200 or 40 percent of its workforce, at its computer chip plant in Sandston. This is part of a much-larger layoff that has analysts wondering whether Qimonda will go out of business, perhaps sometime next year.
The sad thing about Qimonda is that it shows the folly of spending years of recruitment effort and millions in public economic development money to snare industries that have excellent changes of not providing the steady, sustainable jobs and tax revenues that the region needs.
The problem is that so many industrial sectors that once seemed golden can, in fact, become easily commoditized. Making silicon chips is a great example. What once seemed a cutting edge, advanced technology back in the 1970s and 1980s became a sector whose products could be easily imitated by companies in areas with much cheaper labor markets in places such as Asia, Latin America and Eastern Europe.
Back in the mid-1990s state and local leaders made a big deal about getting Motorola and Siemens AG to build a $1.5 billion chip plant at White Oak. Just a few years later, Siemens spun off its chip-making arm and soon, the regular cycle of layoffs started.
A big reason was that the market for chips comes and goes with great demand and great cuts. Chip makers dart the world looking for new plants in places like Taiwan and Thailand so they can squeeze the costs out of their production as much as possible so they can still turn profits in such an uncertain industrial sector. The same is true with personal computer makers. Take laptops. They used to be considered works of high tech genius. No more. IBM years ago sold its laptop business to China’s Lenovo, which seems to do well.
Smart economic development officials need to focus on industrial recruits that can just up and run every time there’s a downturn or some C-Suite decides today’s a good day for a merger. Other states, notably South Carolina with BMW and Alabama with Mercedes, have sought manufacturing that is hard to move. True there are ups and downs in car markets, but these two states probably have a much better record with industries that provide steady work over the long haul.
Advanced manufacturing in Richmond has so far been pretty much limited to the chemical industry, which, while sometimes an environmental threat, does provide sustainable work. DuPont’s Spruance plant has chugged along successful for decades. More such plants are needed, but the homework should be done beforehand.