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November 16, 2009

Host: Ted Simons

Craig Barrett

  |   Video
  • Former Intel CEO and Chairman Craig Barrett will be honored with a 2009 Governor’s Celebration of Innovation Award. It’s Arizona’s highest honor for technology innovation. Barrett will talk about his award and technological innovation.
  • Craig Barrett - Former Intel CEO and Chairman
Category: Business/Economy

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Ted Simons: Dr. Craig Barrett joined Intel in 1974, and went on to serve as CEO, president and chairman of the board for the chip-making giant. Thursday Barrett will receive Arizona's highest honor for technology innovation, the 2009 Governor's Celebration of Innovation Award. He's being honored on educating others on the value of technology and raising social and economic standards. Here now to talk about the award and technology innovation in general is Dr. Craig Barrett. Thanks for joining us.

Dr. Barrett: My pleasure.

Ted Simons: Talk to us about receiving this award and what it means to you.

Dr. Barrett: It's great to be recognized by your peers for doing something you're really passionate about. I've been promoting the use of technology as an economic driver and as a solution for economic growth problems and other problems for years. It's nice to see my peers in Arizona recognizing that.

Ted Simons: How are we doing in Arizona, though, in terms of technology and innovation technology? 10

Dr. Barrett: I think it's a mixed bag. From an education standpoint, you've got probably the best high school in the country, the Basis High School, charter school here. ASU, the honors college there, the engineering college is up and coming, doing well. You've got Thunderbird, well recognized international business school. But there are pockets of brilliance surrounded probably by mediocrity for the most part.

Ted Simons: How do we at least limit the mediocrity?

Dr. Barrett: You basically have to get the community and the legislature and the governor committed that our future is not going to be construction, it's not going to be asphalt. Our future in the 21st Century is going to be knowledge, expertise, innovation. We have to have the state really serious about supporting education all the way from K-12 on up to the university level.

Ted Simons: I’m guessing from that response I’m guessing you don't think the state is serious enough about education?

Dr. Barrett: No, I don't, from what I've seen around the rest of the world. While I was with Intel I traveled to about 30 countries a year. I know what the Chinese and the Indians are doing, the Eastern Europeans, what they are doing in Latin America. Arizona is really not serious about competing at this point in time.

Ted Simons: Why do you think that is?

Dr. Barrett: I just don't think the state leaders recognize the competition that they have. I'll give you a simple example. I'm on the board of Science 11 Foundation Arizona. An organization committed basically to invest in Arizona's future from a technology-engineering standpoint, education standpoint. You know what happened to the funding for it in the last budget cycle, cut to zero. Here's an organization looking forward to the 21st Century. Here's a legislature looking back at the 20th Century.

Ted Simons: How do you convince the legislature to look forward to where we are now? We’ve had lawmakers on the air just say it's not the best place for that money to be spent. How do you convince them?

Dr. Barrett: You have to start from the basics. There are only three levers that a community can pull to be successful in the 21st Century. You need a good education system, you need investment in research and development, and the right environment to promote investment in innovation. Let’s quickly look. In K-12 we rank in the bottom 10% of the United States, and the United States ranks in the bottom 20% of the world, not a good measure. Let's look at funding and R&D. It's a great message to the rest of the world, we're not serious about investing in R&D. What I'd love to have us start building on our points of excellence, instead of just cutting the funding to them. We've got great stuff going on in biotech, bioengineering, the engineering school at ASU is great, Thunderbird's great. We've got some really key educational capabilities here. Let's build on them. But you can't do that if the State is not willing to invest for the future.

Ted Simons: And yet, it's a young state. I've talked to people about this before. It's a young state and we don't have the historic nature of universities and small towns and small colleges and these sorts of things. People come out here and they are ambitious and looking to make more than a couple of bucks and they think they’ve got a better way to do it. Or they are retiring and they are still kind of set back where they came from, as opposed to here. How does Arizona become that forward-thinking place, as opposed to it's a beautiful day, let's go play golf?

Dr. Barret: I never hear that argument about the ASU football team. We're never willing to accept mediocrity on the football field because we're a young state with a young university. I don't know why we accept mediocrity with the educational system if we expect to compete with the rest of the world. We're not competing against California or New Mexico or Nevada. We're competing with the rest of the world. Our kids should be educated at the internationally competitive level. They are not. We need to recognize that, we need to do something about it. That endless discussion in this state about the AIMS test. This test measures the capability of kids when they graduate from high school. We feel really good that our kids can take an eighth grade test and pass it and graduate from high school. That's not acceptable for entering the competitive world.

Ted Simons: There's so much I want to talk to you about that, but let's talk about the impact of technology, creativity, innovation, on a community, both immediately and down the road.

Dr. Barrett: Well, you can look at communities around the U.S. that have been involved in this. They are usually communities around great universities, Silicon Valley, around Stanford and U.C. Berkeley. Go to Cambridge, Massachusetts, and they are around Harvard. Great universities are really the food for innovation. They provide the ideas, they provide the personnel, they provide the students. You combine that with a good venture capital community and you get pockets of innovation and great economic growth. That's exactly what Phoenix needs to do.

Dr. Barrett : You were an instructor at a great university before you even went to Intel. You were at Stanford then you went on to Intel and Santa Clara -- that relationship then, and what you see in Chandler and Valley-wide, as far as Intel and other opportunities, is there a comparison? How do you see that?

Dr. Barrett : There's a bit of a comparison. We have over 10,000 great employees in the Chandler area, best in the world, state-of-the-art. But we don't do a lot of engineering here. We have been growing that capability over the years, but it's mostly a manufacturing facility at this point in time. If you go to Silicon Valley, that was innovation in terms of new product creation, innovation, excitement about new industries. You can look at the new industries that have grown up there, not just Intel, but Cisco, Yahoo!, Google. These are the ideas that come out of one or two smart university students, get in to the marketplace and grow to be tremendously profitable worldwide companies. That's what we need to do here.

Ted Simons: Critics will say you're talking about students, organizations, start-ups, that are 10, 15, 20 years past. How are we ever going to catch up to that?

Dr. Barrett: The technology field moves so rapidly, you know Moore's law, you double every 18 months or so in capability. That gives you the opportunity every 18 months to jump into the new thing with new capability, new products, new services new excitement. You know how Google was created. There are two graduate students out of Stanford. Yahoo, two graduate students out of Stanford. Bright ideas out of the University they can trump the bigger research budget of the most successful company around. Who has challenged Microsoft over the years? Google, Yahoo!. Microsoft spends six or eight billion a year on research. Here come two graduate students, not even finishing their PhDs, challenging the biggest software company in the world.

Ted Simons: Did they get a different kind of education than we see here in Arizona? Are these, again, just families that have historically emphasized education more than families in Arizona do?

Dr. Barrett: If you look at most of the founders of those companies, either Asian heritage or Eastern European heritage, education is considered to be an absolute must, a absolute necessity. I’m sure there was more parental influence on these kids – higher standards. I mean, you look at the charter schools that I mentioned here. Started basically by Michael and Olga Block, Olga comes from the Czech Republic. Comes to the U.S., has kids, wants to put them in schools, and she decides there's no school here good enough for my kids, I'm going start one of my own. Now you've got some of the best couple of high schools here in the U.S., and that ethic, that impetus to up the level of standards of educating our kids is an absolute necessity here.

Ted Simons: It's a necessity the way you see it. But how do you get that lawmaker other there, that legislator to see the same thing when they have all sorts of folks coming at them and saying, don't cut my funding, don't cut my money, we can't afford it.

Dr. Barrett: You have to make the very pragmatic argument that we're in the 21st Century. And you have two choices. You can look through the windshield at it or look through the rearview mirror at the 20th Century. When you talk about asphalt-ready, when you talk about low-paying manufacturing jobs, that's Arizona's future, then that's looking backwards. You need to look at the 21st Century. Knowledge-based, tech-based, science and research-based, adding value to what you do. That's how you have a good-paying job. That's what Arizona should be thinking about. We just need to continue that dialogue with legislators.

Ted Simons: What you say takes work. You can't just sit around and wait for it to happen. You've got to make it happen. Is that mindset in Arizona right now? I mean, just the base will to get this done?

Dr. Barrett: You know, thinking about this award I get at the Governor's innovation meeting in a couple of days, I think that award is not so much for Craig Barrett. That award is for what my peers are thinking about what is important, and what I've been saying, which is just what we're saying in this discussion. What's important for Arizona's future? I think they are voting saying, hey, what's important for Arizona's future is a good education system, investment in research development, focusing on what's going to make Arizona successful in the 21st Century. I think that dialogue is here. We just haven't articulated it enough. You know Michael Crow has been saying this at ASU. A bunch of from the private sector have been saying this. We just need more momentum.

Ted Simons: On a personal note, Intel, all those years, corporate management and just overseeing this chip-making giant: Lessons learned there that you're trying to impart on folks now.

Dr. Barrett: Let me give you one of the biggest lessons, our company is in relentless pursuit of Moore's law. Each year we have a 90% turnover in our revenue. It comes from products that were not there in January. You either have new products on a continuing basis or you're dead. You can't save your way out of a recession. You can only invest your way out of a recession. Lesson one, during a recession don't slow down on your investment in the future. You have to keep making that investment if you want to be successful, or you fall behind. Lesson two, you have to have the best and smartest people working for you. You have to have the best education background for those people. If you don't have smart people, you can't be successful. And what I'm basically saying, education system is critically important, investment and research and development is critically important. Without those two things you can't be successful.

Ted Simons: Dr. Barrett, great stuff. Thank you so much for joining us, we appreciate it.

Dr. Barrett: My pleasure.

Solar Company Moves to Arizona

  |   Video
  • Chinese solar panel manufacturer Suntech Power Holdings has announced plans to build a manufacturing plant in Arizona. Barry Broome, President and CEO of the Greater Phoenix Economic Council talks about ongoing efforts to lure renewable energy companies, like Suntech, to Arizona.
  • Barry Broome - President and CEO, Greater Phoenix Economic Council
Category: Sustainability   |   Keywords: gpec,

View Transcript

Ted Simons: Tonight on "Horizon," a major solar power company will soon base its North American headquarters here in the Valley. And a chat with Craig Barrett, the former head of Intel. That’s next on "Horizon." Good evening, and welcome to "Horizon," I'm Ted Simons. Vice president Joe Biden was in Phoenix today talking about the impact of stimulus dollars in Arizona. The Vice President said only 12 states have received more than Arizona's $5 billion. He said a $250 payment to veterans alone added $264 million to Arizona's economy. He said that two million Arizona families have received a tax cut from the stimulus plan. The late Senator Carl Hayden represented Arizona on Capitol Hill for 20,773 days, a record that works out to about 56 years. The record was broken today by West Virginia Senator Robert Byrd, who now has spent 20,774 days on the hill. Carl Hayden is best remembered for helping Arizona secure Colorado River water by way of the Central Arizona Project. In other news, a Chinese solar power company announces it'll be locating its North American headquarters and manufacturing facility right here in the Valley. Sun-Tech Power Holdings Company announced the move last night. Here to talk about Sun-Tech and what this all means for the 3 state's economy is Barry Broome, president of the Greater Phoenix Economic Council. Good to see you back here, thanks for joining us.

Barry Broome: Good to see you.

Ted Simons: Sun-Tech manufacturing in the Valley. Who is Sun-Tech?

Barry Broome: Sun-Tech is China's largest photovoltaic manufacturing technology. We have been working with the company for about two and a half years. This is really a flagship company in China. It's going signal to the Chinese manufacturers that Greater Phoenix and Arizona is a place to do business. It's a big win for the Valley, and I think it's going to open doors for solar and other industries here in China.

Ted Simons: A flagship company… Compare it to something we have here in America.

Barry broome: It's on the order of a Microsoft, an IBM. If you think about enterprise excellence in China, Sun-Tech is really a pride and joy of the emergence of China's free market economy.

Ted Simons: How many jobs are we talking about?

Barry Broome: Probably in phases, it'll start with 75 and in 2010 it’ll phase up to 150. It should build out to about 250 jobs. But it's possible, depending on the market, it could really go to scale. But I would say comfortably 75, another 75, and then eventually about 200 to 250 jobs.

Ted Simons: Do we know what part of the Valley, what city this thing is going to be?

Barry Broome: Well they have a site in the East Valley and one in the West Valley. They have asked us to not speak to the communities themselves. We were in competition with New Mexico, Texas and California in particular. This is the first time -- I don't know if I'm proud to say or embarrassed -- it's the first time we've beaten Texas head to head in a major project, and the first time we've beaten New Mexico in a solar project.

Ted Simons: I want to talk to about that competition in a second but back to the jobs. What kind of jobs are we talking about?

Barry Broome: Well, you know, these jobs will be production jobs. A lot of the solar capital-intensive investments are still not getting the credit in the markets. So, the markets will have to level off for us to see these really capital-intensive projects that are going to be paying really high wages. These will be jobs with health care, but they are going to be modest as far as some of the projections we had earlier. So they will qualify for the tax credit. We don't know how many will be 125% of the state wage. But these are production jobs, these are you know, 32-33 thousand a year jobs in this facility. They are going to bring their distribution center to it. We don't know how many jobs that will be yet. It's a good start on an industry that we want to be a serious player in.

Ted Simons: Back to the competition. Sounds like Austin, Texas, was the chief foe here, the chief rival in terms of getting Sun-Tech. What did we have that Austin, you think, didn't have?

Barry Broome: I think there’s three things. Proximity to California is 5 really important. Sun-Tech has major objectives to service in the California market. Distribution from Greater Phoenix is much better than Austin. The second thing we had working for us was the Arizona Corporation Commission has a 30% carve-out for their distributive generation strategy. They are requiring clean technology produced in Arizona, but they promote distributive generation. That was of great interest to Sun-Tech. They have had a growing relationship with Arizona State University, as you know Dr. Crow has gone to China many times and they have established a dialogue. And then 1403 if the project grows in scale they will be able to get property reclassification and income tax credits against job performance. Right now, the first phase of the property will not be large enough to get property tax reclassification.

Ted Simons: I was gonna say, talk more about the tax incentives and that particular avenue, that it seems like was very important in getting this company here.

Barry Broome: It was very important to the company. The company's being very conservative in their commitments. So the first phase of that investment is $13 million to $15 million. I expect it'll be much bigger when it's done but that’s currently what the company’s pledged. Because they are not committed to $25 million, they will not get property reclassification under the solar bill. Now this is halfway there. I'm anticipating that's really a kind of a semantic, because I do think the second phase will take them over $25 million, and they will then qualify for the property reclassification. The jobs that pay 125% of the state wage, there’s a formula embedded in the program so they will be eligible for a refundable tax credit based upon job performance and capital investment.

Ted Simons: The odds, people hear mostly manufacturing Chinese company, they will say, where are the six-figure jobs? Where's the glamor stuff? Where is the glamor stuff and how soon can that get here?

Barry Broome: The glamor stuff is not going to be connected to this project, quite honestly. There are two or three other projects. Right now 71 companies that are evaluating Arizona for investment, and that is based upon the condition of the market, capital investment capabilities, Wall Street, banking performance, all the things that are making things swirl in a sideways direction. Out of the 71 there are five that are evaluating it. There are about two of those companies that are going to bring engineering jobs and executive jobs. Three of them are going to be strictly production facilities. But even at $35,000 and $44,000 a year jobs with health care benefits, with unemployment reaching 10% and Arizona having 20,000 people to added AHCCCS, if they pay health care -- and unfortunately health care jobs, coverage at $35,000 a year is an important contributor to our economy right now. 7

Ted Simons: China could be an important contributor to our economy, aside and apart from Sun-Tech. Could this lead a whole horde type of business activity across the ocean?

Barry Broome: We are evaluating this right now. We are not aware of any Chinese investment that's occurred in the United States. They have invested in companies and made some acquisitions, have moved capital into the U.S. market. But an owned and operated manufacturing facility by a Chinese enterprise, we are not aware of one outside of this. I assure you all of the industrial leadership of China is closely watching this move. I do think, which has been a dream of ours, of GPEC of Dr. Crow and other people, I think China will become an aggressive inward investor in the United States. And I think Sun-Tech will signal that other Chinese companies should be in the United States, beyond solar.
Ted Simons: I know you made a trip to Germany not long ago. Are we gonna see some German companies over here?
Barry Broome: One of the things that happened, it took us two years to get our solar renewable bill passed. The Germans are investing heavily in thin-film technology, which is very capital intensive. They have made a lot of investments that they’re hoping will pay off in Oregon and New Mexico. So, we were a little late, but we're in front of the curve in Spain and China. We're a little bit behind the curve on Germany. I'm still optimistic we will have a presence of German industry in Arizona. Unfortunately they’ve been clustered in Albuquerque and Portland. And we’re hoping to de-cleat those clusters, so to speak, and got some of them in Arizona. The bills passed early enough 8 for us to get in front of Spain, Japan, China, from a foreign direct investment standpoint and I think as the market recovers, I think you'll see California companies investing in Arizona.

Ted Simons: I was going to say, last point here, somewhat ironic but Tempe-based First Solar has huge operations going on in China. And then we have a Chinese major company starting to get operations going here in Arizona. Sounds like things are happening between Arizona and China.

Barry Broome: Yeah, and you know, if you haven't had the pleasure of negotiating a transaction with Chinese business leaders we now have, it's a very different kind of transaction. And they make very long-term commitments and very serious decisions when they make an investment. I really think the move of the vice-chairman being here with Governor Brewer, and the investment of First Solar going to China, I think it's a two-way street that could be very exciting for Arizona.

Ted Simons: Alright Barry, good to see you, thank you for joining us.

Barry Broome: Thank you.