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Ireland: Silicon Isle of Europe

Ireland's highly educated but largely unemployed youth are becoming the backbone of Europe's high-tech industry.

Unemployed youth are usually considered a social problem. In Ireland, they are becoming the backbone of Europe's high-tech industry.

Hewlett Packard (HPW) and Seagate Technology (SEG) are two of the American high-tech manufacturers to recently take advantage of Ireland's high unemployment rate and tax incentives to build a new base for European manufacturing operations.

And it's not just hardware companies. Business application giant SAP AG just opened new operations in Ireland to train engineers for assignments across the continent.

Ireland has become the computing center of Europe--close to half of the computers sold on the continent come from Ireland. And observers don't expect a slowdown.

The rise of Ireland's high tech can be attributed in part to demographics. More than 40 percent of the population is 30 and under, said said Paul Cronin, vice president and general manager for the Industrial Development Agency for Ireland; that compares to 30 percent in this age range on the rest of the continent. The unemployment rate in the rest of Europe, however, is lower. This means the Irish labor pool is cheaper and younger.

"The critical natural resource for these manufacturers is the 18- to 25-year-old group," said Cronin. "We have an unemployment rate of around 11 percent."

For comparable high-tech jobs, Cronin estimates that Irish workers earn 30 to 50 percent less than their European counterparts.

But Irish workers have similar educational backgrounds. Fifteen years ago, the government revamped its educational system to ensure a higher percentage of technology graduates. Educators have also paid special attention to international issues: Undergraduates in business administration at Irish universities must demonstrate a proficiency in a European language.

The government is now retooling the curriculum again to try and ensure that two-thirds of Irish graduates are headed for the high-tech industry.

"Philips opened a manufacturing facility here with 150 people," Cronin added. "They were hiring half of the graduate output from one program at Trinity College, so they thought, 'Why not put it there?'"

The workforce isn't the only attraction. Cronin said that European Community rules allow Ireland to offer a 10 percent corporate income tax to exporters, lower than what governments can generally offer on the continent. If this rule were eliminated, the EC would be obligated to make up for it by paying capital improvement subsidies to the country.

So far, Ireland's core skill is fabrication and assembly. HP's new plant in County Kildare, for example, will employ 1,000 workers to build ink-jet printers. The manufacturing activity has subsequently drawn large resellers such as Entex Information Systems to act as the conduit between manufacturers and customers.

But Ireland also has a burgeoning business in localization, or the translation of software from one language to another, according to Ellen Litvak, director of marketing for International Communications, a Natick, Massachusetts-based localization firm. "They are getting more expensive though," she noted.

Still, Cronin doesn't think rising prices will undermine Ireland's central role in Europe's computing industry. "None of [the other countries] are as hungry as we are and none of them have the structure," he said.