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Hawaii lures builders of high-tech components

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Hawaii is seeing the dawn of a new high-tech manufacturing industry here that goes beyond software development and involves the art of building precision computer components.

Years of planning and debate over the use of tax credits to build the high-tech business in the islands are slowly paying off, though the industry is still very much in its infancy.

Computer chip manufacturing is scheduled to begin in Kakaako this month at a new 10,000-square-foot facility, the first of its kind here. Meanwhile, a handful of other mainland companies doing various types of tech manufacturing are considering relocating production facilities in Hawaii or opening branches here.

"For a state that has almost no manufacturing, all of a sudden a bunch of stuff is showing up," said Phil Bossert, executive director of the state High Technology Development Corp.

Jobs in the industry pay $60,000 to $100,000 or more for candidates with advanced degrees in science and engineering.

Some see Hawaii as a natural bridge between Asia and the U.S. mainland. Others like the lifestyle. All are being attracted by the state's natural beauty, big tax incentives and its strategic location.

They are also being lured by hundreds of millions in federal money for military projects in Hawaii. The Senate recently approved $542.5 for defense-related spending in Hawaii starting next year.

Advanced Photonics Integrated Circuits, a Los Angeles-based chip manufacturer, is opening the plant in Kakaako based on its five-year, $100 million contract with the U.S. Navy to develop photonic integrated circuits for aircraft, ships and tanks. It also could have a built-in market producing chips to support biotech companies near the new medical school.

Instead of asking why, entrepreneurs now are trying to figure out how to get to Hawaii.

Barry Jones, CEO of Pacific Silicon Sensor Inc. in Westlake Village, Calif., is itching to move the small optical electronics manufacturing firm to the Big Island. The company is a division of Germany's Silicon Sensor International AG.

Jones's group designs and packages visible light sensors for defense and medical applications.

"We are actually looking for incentives and a reason to convince our board to approve a move over there," Jones said.

The company found a small building in Kona overlooking the water it believes would make an ideal facility and is checking if it's for sale or lease.

"We are in a great area in Westlake Village, but when both the chairman and the CEO and everyone in the company likes Hawaii, if it's close enough to being the same cost-wise, there aren't many disadvantages to being in Hawaii," Jones said. "The tax structure there is better than we have here in California."

Pacific Silicon makes about 10,000 light sensors a month and requires about 5,000 square feet of commercial space. It would start the office with six employees, which include Jones.

The Big Island makes sense for the company because of the large number of telescopes, which use its sensors for star tracking.

Jones anticipates it will be another six months before he can gather enough information to convince his board to make the move.

"Hawaii is a very attractive place to live, a very attractive place to draw customers to," he said.

Dhaval Brahmbatt, CEO of Silicon Valley-based Phychip Corp., has dreamed of opening a company in Hawaii for years, but was waiting for the Asia market to mature. He wants to open a research-and-development facility on Oahu for the company's data security-related products. Phychip also has offices in Malaysia and India.

"I'm very excited about the potential Hawaii can offer," Brahmbatt said. "The reason being Hawaii is strategically located between the mainland and the Far East. That makes a huge difference when traveling from Hawaii to Hong Kong, Taiwan, China, Singapore and Australia."

Brahmbatt, who is chairman of the IEEE San Francisco Bay Area Nanotechnology Council, also researched the University of Hawaii's Electrical Engineering Department and came away impressed.

The company has been talking with the state to find incubation space on Oahu in the Manoa Innovation Center or space near the Honolulu International Airport.

Brahmbatt would like to develop the company's microchip technology in Hawaii. It protects data stored on computers.

For now, manufacturing would be handled outside Hawaii, but could eventually be done locally.

Indiana-based Electricore Inc. is also in the process of setting up a branch in Hawaii.

Gov. Linda Lingle recently signed Act 129, which authorizes the High Technology Development Corp. to issue up to $30 million in special purpose revenue bonds to assist Electricore in the design and construction of unmanned, electrically powered aerial vehicles. UAVs, as they are called, have been used in Iraq and Afghanistan for reconnaissance.

"Now that the act is passed we are looking at the numbers," said Matthew Kobayashi, director of Electricore operations in Hawaii. "What the special purpose revenue bond does is makes it very attractive for us to build a small UAV manufacturing facility here."

The company wants to partner with California-based AeroVironment to manufacture UAVs in Hawaii. AeroVironment is best known here for Helios, the solar-powered experimental aircraft test flown by remote control from the Pacific Missile Range Facility on Kauai.

Last year, AeroVironment won a U.S. Department of Defense contract worth between $70 million and $80 million to produce 900 UAVs. Kobayashi also represents AeroVironment in Hawaii.

A Hawaii manufacturing plant would serve the Asia market for these craft, Kobayashi said.

"It's a cottage industry in its infancy," he said. "It's really hard to figure out where it will stabilize and how significant the Asia market is. These are all factors we have to consider if we say we are willing to put X amount of dollars into a manufacturing facility in Hawaii."

Kobayashi estimates the company would need a 20,000-square-foot facility that would employ between 150 and 200.

A lot is riding on the Department of Defense budget for fiscal year 2005. If more UAVs are planned, Kobayashi said he believes the Hawaii facility could become a reality. The company will decide by year's end whether to proceed.

:D

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hehe although very small its a step in the right direction and helps diversify the economy even more so i'm all for that!

In more related news....

Honolulu tech jobs -- thousands created, more to come

Enterprise Honolulu, the economic development organization for Oahu, has a deal flow pipeline that would bring 3,600 more jobs to Honolulu.

The outfit, working with more than 220 companies, says it has lured more than 1,500 high-paying jobs to Honolulu in the past two years, for an economic impact of $212 million.

But now it can lure up to $1.9 billion more investment, based on deals already in the pipeline, CEO Mike Fitzgerald says.

"These results show that there is real potential to build a third pillar for Hawaii's economy in the tech R&D sector," said Bill Spencer, president of the Hawaii Venture Capital Association, in announced that Fitzgerald would give a progress report on this at the HVCA monthly meeting this week.

Michael Fisch, chairman of the Enterprise Honolulu board and the publisher of the Honolulu Advertiser, will also take part in the presentation at the luncheon meeting, 11:30 a.m., Thursday, July 22, the Plaza Club.

In addition to discussing the job report, Enterprise Honolulu leadership will discuss the Biotech Roadmap effort being undertaken to define science-based industries most suitable for fostering Kakaako's long-range development, and the new Hawaii Technology Development Venture. The team will also discuss future initiatives and challenges Hawaii faces in maintaining the momentum the organization has created.

:P

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