Consider the alternative

High-tech and life-science companies show their resiliency
by reinventing themselves to adapt to changing markets

 Last year, Tar Heel high-tech and life-science workers escaped the worst of the shock waves rippling through the economy. In November, statewide employment in computer manufacturing and systems design had increased slightly from a year earlier. Employment in drug manufacturing had dipped slightly, after four years of growth. But trouble looms for information-technology workers. Job vacancies in November fell by nearly a third from the month before — more than double the national decline — and layoffs are expected. But the tech sector is resilient, says Chuck Swoboda. He’s CEO of Cree Inc, the Durham-based maker of light-emitting diodes, which are alternatives to traditional lighting.

BNC: Which way is employment heading?

Swoboda: The tech sector is pretty broad, and I’m not sure I can speak to the whole thing. There are different dynamics. The one I can speak to is alternative energy. Despite the fact that the price of oil is going down, the price of electricity continues to go up. The need to reduce energy consumption remains strong. That puts Cree in a strong position, as well as some of the other alternative-energy-type companies. Could the economy slow us down? Sure. But the long-term trend is toward alternatives. Even in a pretty tough market, the macro driver for energy-efficient lighting continues to grow.

How has the credit crunch affected the tech sector?

Credit obviously is going to affect the large capital projects. Large capital projects for alternative fuels or large solar installations may see some impact. When you’re talking about energy-efficient lighting, you’re talking about a small capital investment and a short payback, so we’re seeing strong demand.

Which parts of your business are seeing the biggest slowdown?

Things related to consumer electronics — mobile phones and televisions, for example — or automotive. The automotive sector is obviously way down, so that’s affecting everyone in that supply chain. But most of our investment in the last two years has been in how we lead this LED lighting revolution and drive lighting efficiency. We made a bet there a couple of years ago, and that bet obviously has paid off, given the slowdown in these other markets.

Offshoring is a big issue in many industries, but most of your assets are still in the U.S.

Our employment split is probably about equal. While we have had a lot of growth in Asia, we’ve also had incremental growth here. You’ll probably continue to see some growth in North Carolina, but we’ll continue to make equal or greater investments outside North America, primarily because that’s where a lot of the growth in our business is.

Especially China, your biggest market?

We moved a lot of production over there for our LED components over the last year. But even with that, our overall employment in North Carolina remains strong because there’s so much innovation. We’re able to focus on the new products here and allow our team in China to drive up the volume of some of the existing products.

Do you expect the elections to affect technology here?

For our segment of the sector, the recent election is a positive: We’re going to see more progressive energy policy.

How can state and federal leaders help the sector?

Realize that successful technology businesses and technology environments tend to flourish in areas that walk the talk. North Carolina has benefited for years from low-cost energy and maybe developed some habits based around that. For North Carolina to become successful, we have to be a leader in this new-energy economy, not just in creating the jobs but in using it and driving it. That’s where you see technology economies thrive, not only where technology is invented but where it’s utilized, because that culture breeds more innovation. California embraced the technology that came out of Silicon Valley. It was not only the place where it was invented, it was a place where it was consumed and refined.

What else is needed?

We still lack some of the financial-investment infrastructure to really drive an economy that is built on small, innovative startup companies. But that’s the second phase. You’ve got to create the culture first.

Overall, what do you expect for Tar Heel tech in 2009?

Mixed results. We’re going to have some ups and downs in areas affected by those capital market constraints. But technology businesses reinvent themselves all the time, and any segment that is about adjusting to the environment and reinventing itself is a pretty good one to be in.