At mid-year, manufacturers are N.H.'s economic bright spot



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Turbocam International could be helping to build the big engine that could, both literally and figuratively. For the last 25 years, the Barrington manufacturer has been using advanced five-axis machining to create bladed parts for engines and compressors - no nanotechnology, no exotic software, not exactly your idea of the kind of high-tech startups that pulled the state out of previous recessions.Yet Turbocam does what it does so well that the company's sales have grown 68 percent in the middle of the recession, making it one of the top 5,000 (3046th, to be exact) fastest-growing firms in the country, according to Inc. magazine.And where is the company selling its products?Named the 2011 Small Business Administration's New Hampshire Small Business Exporter of the Year, the company sells 70 percent of its manufacturing output directly as exports or indirectly as components assembled in other exported products."A lot of the product goes to China," said John Bressoud, general manager of Turbocam's industrial division. "If you are not selling to China, you aren't selling."Turbocam is not indicative of the entire New Hampshire economy, which largely has been spinning its wheels, with little traction. But it is indicative of why the state is doing better than most of the nation.Last year, New Hampshire companies increased their exports by 43 percent, making the state the fastest-growing exporter in the United States. This quarter it lagged behind a bit - only growing by 10 percent, compared to the nation's 18 percent as a whole - but it still exported more than $1 billion worth of goods in three months.Where are the exports going? Lots of places."In the first three months, we already were in 141 distinct markets. Pretty darn good," said Justin Oslowski, director of the New Hampshire Export Assistance Center, part of the U.S. Department of Commerce.But there has been a profound shift in those markets.Fifteen years ago, the state's biggest trading partner by far was Canada, which took 2.7 times worth of the state's goods as England and Ireland - which were second and third, respectively - combined.Mexico supplanted Canada in 2009. Canada remains No. 2, but that's only because Hong Kong and China are considered separate export markets.In reality, however, most of the goods shipped to Hong Kong go to China, so combined, they now surpass Canada as New Hampshire's second-largest export market. Indeed, last year, growth in exports to China and Hong Kong increased by 95 percent and 131 percent, respectively. In the first quarter of 2011, growth in exports to China slowed to a 25 percent increase to reach a total of $72.6 million, but shipments to Hong Kong exploded, going up 354 percent, to $86.6 million.Smart manufacturersWhat is going on here? Isn't China flooding the United States with consumer goods? Are we now selling televisions, cars and cell phones to China?Not quite. Turbocam doesn't sell trucks to China. It sells high-quality parts to fabricate engines, which are then shipped to the United States, as well as other places, to install in trucks.Or take GT Solar, which uses Chinese characters on its home page. The Merrimack company has announced over the past two months its biggest single contracts ever, and both were to companies from China: a $219 million deal through its solar business and a $460 million contract through its newly acquired LED division.But GT isn't shipping solar panels or LED lights to China. Instead, it is sending the furnaces that enable Chinese companies to produce the materials needed to produce solar panels and LED lighting, which China then ships all over the world.GT and Turbocam are examples of the highly specialized, value-added smart manufacturing that the Business and Industry Association of New Hampshire and others now group in with the more "traditional" high-technology companies that most people envision - the ones that make computer software, biotechnology, nanotechnology, applications, communication networking and the like.The smart manufacturing/high-technology sector, or SMHT, as it's called, also includes "manufacturers engaged in new products using advanced technology and skilled labor," according to a report prepared for the BIA and the New Hampshire High Tech Council by the Center for Public Policy Studies. Many of these companies are not startups, but survivors.As Laconia economist Russ Thibeault sees it, "survivor" should apply to almost all New Hampshire manufacturers these days."We lost a third of our manufacturers," said Thibeault. "We are down to the hard core."The "hard core" includes 3,700 companies, which the report says employed about 80,000 people in 2010, and paid out wages and benefits of some $6.4 billion - making it the largest single sector of the state's economy and among the highest-paying.This sector thrives on exports - some 77,000 of the jobs in the sector are involved in exporting, according to the study. And it brings in four times as much wealth from foreign countries than tourism.These "smart manufacturers" not just smart at developing or acquiring new technology, and they aren't just smart enough in pursuing exports, opening up divisions and hiring overseas. They are also smart enough to diversify.Take Turbocam. Its industrial division was the main show until its owner decided to diversify into the automotive field shortly before the turn of the century. The diversification started taking off in 2002 with the signing of Cummins Turbo, one of the big three turbo engine companies.And GT Solar was strictly involved in solar before it jumped into the LED business by acquiring Crystal Systems Inc. last year.This is part of a larger trend, of course. The United States used to manufacture consumer goods and sell them all over the world. Today, manufacturers grow by finding unique niches in the manufacturing process wherever in the world they may be and filling them like no one else can."We are making a transition," said Dennis Delay, deputy director at the Center for Public Policy Studies. "From a borrow-and-spend economy to a save-and-export economy. You look at China, it's moving from export-saving to more consumer-based. There is a convergence around the world."China is still manufacturing, but "but more putting things together as opposed to making high-value parts," said Delay.The goal in New Hampshire? Making those high-value parts. Or maybe we should just say, making it.Bob Sanders can be reached atbsanders@nhbr.com. Edit ModuleShow Tags