Edinburgh, Scotland--You've heard of California's Silicon Valley--and maybe the Silicon Hills of Texas--but how about Silicon Glen?
A 70-mile-wide area stretching across central Scotland-which includes Glasgow, pioneer shipbuilding city, and the cultural center of Edinburgh-Silicon Glen is where five of the top ten PC and workstation makers have manufacturing or design operations: Digital Equipment Corp., Compaq Computer, IBM, Sun Microsystems, and Hewlett-Packard. In fact, 10% of the world's and approximately 40% of Europe's PCs are produced in the region, as well as 35% of Europe's workstations.
Over 400 foreign high-tech companies-including about 200 U.S. firms-have manufacturing and service facilities in Silicon Glen, which employs more than 52,000 people. Electronics surpasses even whiskey as Scotland's biggest export. Electronics-related products last year accounted for more than $7.5 billion, or about 43% of Scottish exports. Notable U.S. electronics companies with Scottish locations include Motorola, National Semiconductor, AT&T Global Information Solutions (formerly NCR), and Solectron. The chip companies share more than 11% of Europe's total semi- conductor capacity.
Technology and innovation are not new to Scotland. Consider this:
Robert Watson Watt headed the research project that gave Britain radar to track down enemy aircraft in World War II. The research was done in Scotland to avoid the German bombing of England.
Edinburgh-born physicist James Clark Maxwell-ranked as one of the greatest physicists and scientists of all time-discovered laws governing electric and magnetic fields.
James Watt invented the modern steam engine in Scotland in 1765.
Scotsman John Napier in the 16th century invented logarithms and the first calculating machine, called Napier's Rods. The two inventions led eventually to the slide rule.
Still, when most Americans think of Scotland, they conjure up visions of kilts, bagpipes, whiskey, salmon, sheep, and castles. During my week's stay, I saw (and sometimes tasted) all these traditional offerings. But I also visited five U.S.-based companies-all of which were expanding-and talked with engineers from other companies, as well as with academics, studying such cutting-edge technologies as nanotechnology, voice recognition, and massively parallel computing.
Why Scotland? Companies cite a number of reasons for locating in Scotland. Chief among them are:
Quality of the workforce
Universities and colleges
Clean water supply
Network of supporting services
Ease of transporting goods to the rest of Europe
No language barrier-English is the native language.
Slightly smaller than the state of Maine, Scotland's population totals 5.1 million. Unemployment in 1993 averaged 9.6% out of a workforce of 2.51 million. These statistics are courtesy of Locate in Scotland (LIS)-a UK government agency that helps foreign companies establish operations in Scotland. The agency offers custom incentive packages to U.S. companies considering Scotland for European manufacturing operations. The packages can include: grants, tax breaks, and recruitment and training assistance.
According to LIS, the quality of the workforce is the number-one reason for foreign investment in Scotland. LIS backs this up with these statistics: Productivity in the electronics sector has risen 8% per year since 1986, and unit labor costs are 8% lower than the UK average. Absenteeism is the lowest in the UK, and labor turnover is generally less than 5%.
Also, companies in Scotland can take advantage of Britain's negotiated exemption from the European Union's "social chapter," which imposes a variety of worker-protection regulations on corporations.
High-tech workforce. The country's 54 colleges and 13 universities produce more than 10,000 graduates per year, with 50% receiving degrees in science, mathematics, or engineering. Eight of the universities have "Science Parks" attached to their campuses, enabling technology-based companies to carry out added research and development.
The links between high-tech firms and the universities and colleges are strong. For example, several companies I visited had work/study programs with local schools, and Cray Research has donated supercomputers to the University of Edinburgh's Parallel Computing Centre for shared research.
Foreign high-tech investment in Scotland, begun mainly as a manufacturing venture, has expanded into design work. "Innovative product development and research is going on in Scotland," says LIS Director Martin Togneri. "It's not just a place to bolt together boxes."
Land of Plenty. Because much of Scotland remains undeveloped, companies can acquire "greenfield" sites-large, undeveloped pieces of land where companies can build and expand as they see fit. Motorola, National Semiconductor, Hewlett-Packard, and Sun Microsystems are all expanding their facilities.
Besides a long list of component suppliers, Silicon Glen's co-manufacturing support is one of the strengths of its electronics infrastructure. Services these subcontracting companies provide include: printed-circuit-board assembly, surface-mount assembly, mechanical assembly, cable harnessing, plastic molding, engineering design services, packaging, and manual writing.
One U.S. company that specializes in contract manufacturing of pc-board assemblies is Solectron in Dunfermline. The firm currently employs about 800, but a $15.5-million expansion should bring employment up to 1,000 by the end of the year.
Another aspect of the country's support network is its telecommunications system. Scotland offers direct-dialing facilities to 200 countries, and claims it provides the widest coverage in the world.
Some of the oldest U.S. investors in Scotland are: the former NCR Corp. (now AT&T Global Information Solutions), which set down roots in 1946; IBM, which arrived in 1951; Hewlett-Packard, which made the scene in 1967; and National Semiconductor and Motorola, which founded Scottish plants in 1969.
The third-largest employer in Scotland, IBM's Greenock facility, has 2,500 workers. It lays claim to being the world's largest PC manufacturing plant, producing about 1 million PCs a year, as well as computer monitors. The company's latest investment: an Electromagnetic Compatibility Laboratory to monitor and regulate electrical and electronic equipment so that it can operate without interference from any source of electromagnetic energy.
Greenock is also home to National Semiconductor's Analog Center of Excellence. The facility's 1,500 people work around the clock operating two 4-inch and two 6-inch fabrication lines that produce BiCMOS silicon wafers. The finished parts include: high-frequency amplifiers, op amps, and analog automotive chips. Also on-site is a 60-person design team that develops products for local-area networks.
Digital Equipment's plant in Ayr serves as the company's primary European manufacturing center for small computer systems and MicroVAX 3100 products. About 60 of the 1,700 employees are involved in product design, such as that of the Alpha AXP PC 150, based on the ultrafast 64-bit Alpha AXP RISC chip.
Compaq's largest manufacturing location outside America is in Erskine, which is also home to the company's international service and repair center. The plant makes both desktop and portable PCs and employs about 1,000 people.
Another computer maker, Sun Microsystems in Linlithgow, is the exclusive world manufacturer of the SPARCstation(TM) Voyager line of portable workstations. The plant also produces SPARCstation 5 and SPARCstation 20 desktop units, and has three state-of-the-art surface-mount-technology production lines.
"Scotland is the most cost-effective place to manufacture a new product outside the U.S.," says John Shoemaker, vice president of Sun's worldwide operations in Milpitas, CA. He says that the company solves all kinds of problems around the globe everyday by using its own technology and sending lots of e-mail messages. "The sun never sets on Sun," he adds.
I'll take the high road. Because it's part of an island, you might consider Scotland to be rather isolated, but transporting goods is not a problem. The country boasts four international airports, many shipping ports, and a rail system that hooks up with the English Channel Tunnel.
Using the "Chunnel" to transport goods from Glasgow to Paris takes 22 hours. Using trucks and the channel ferry-weather permitting- would take at least 100 hours, according to Dr. Alan McKinnon of Scotland's Heriot-Watt Business School. This transportation system is critical: Europe buys 70% of Scotland's exports.
The growing western European marketplace has almost 345 million people and a gross domestic product of $5 trillion. In today's increasingly global economy, American companies looking to test the international waters might want to start by exploring Scotland.
Motorola: Slowly overtaking Scotland
"The new chips we will produce will put Motorola East Kilbride at the forefront of the semiconductor industry not just in Europe, but across the world," said Jim Norling, European president of Motorola, after announcing another $392.5 million investment last fall. The expansion will bring total employment up to 2,550 and make the plant the largest single-site manufacturing operation in the country.
When it comes on line early next year, the new equipment will fabricate triple-layer, 32-bit CMOS semiconductors, in addition to the company's present double-layer chips. These chips include the flagship 68000 series microprocessors, digital signal processors, and 4-Mbit dynamic RAMs. "Our biggest challenge is to build capacity fast enough to keep up with demand," says Bill Matthews, European marketing and applications manager at East Kilbride.
More recently, the company announced that East Kilbride will be further expanded to develop smartcard hardware and software. In 1996, the plant will become the "center of excellence" for smartcard technology, and at the same time, a center for manufacturing automation technologies working with Scottish universities.
One of Motorola's biggest semiconductor customers is Motorola's Easter Inch facility-a 2,000-employee site that makes mobile cellular phones for Europe using the GSM digital standard, and for the rest of the world. A nearby R&D center develops automation systems, computer integrated manufacturing systems, enterprise modeling, and product-simulation systems for Motorola plants throughout Europe.
AT&T: Automating service
AT&T Global Information Systems in Dundee designs, manufactures, and sells "self-service systems," such as automated teller machines (ATMs). The 1,500-employee plant produces about 42% of ATMs worldwide. The 600-engineer staff also develops ATM technology for people who are disabled or blind.
Produced at Dunfermline, the company's latest, "fourth-generation" product is a line that offers interactive video marketing. These machines can provide information and services for everything from bank tellers, sales clerks, and travel agents to car-service centers. Three times more reliable than existing machines, the fourth-generation units will be available for service up to 99.9% of the time, say company officials. The screens can be seen in strong sunlight, are hardware and software compatible with existing systems, and can cope with 16 different currencies.
AT&T has strong links with Scottish universities. It recently demonstrated a prototype ATM that uses voice recognition to verify the identity of the card user. The unit was developed at the Dundee Institute of Technology. The company's latest contract with the Institute is for an artificial-intelligence expert system that will monitor ATMs for faults in both the electronic and mechanical components.
HP: Tops in telecom
Hewlett-Packard employs 1,100 at its three manufacturing units in South Queensferry. One unit designs, manufactures, and markets telecommunications testing and measurement instrumentation products for the company's worldwide market; a second unit develops and manufactures microwave equipment; and the third produces low-volume, high-specification printed-circuit boards for HP plants worldwide.
Some of the latest telecommunications devices from HP are an asynchronous-transfer-mode (ATM) module for its SDH tester, and a network management system for Signalling System No. 7, which is the central nervous system of the modern telecom network. GTE in the U.S. and Deutsche Bundespost in Germany have signed multimillion collar contracts for the system to detect fraud.
"Most telephone companies are victims of telephone fraud. The problem is estimated to cost $10 to $15 billion annually worldwide," notes Telecom Systems Division Manager Tom White. "Our network management system can detect different types of fraud."