San Diego’s biotech industry is the darling of the local economy, with $700 million a year in venture capital funding and more than 700 companies.
Most expect it to grow. In fact, Our City ranked it in 2013 as the industry most likely to grow our economy during the next decade. However, biotech has grown so large that it is now a very diverse cluster, with some businesses research oriented, others as testing laboratories.
While experts expect the cluster as a whole to grow, some sub-industries within that cluster are expected to grow at an even faster clip.
Our City sought to drill down deeper to get an understanding of which sub-industries will grow the fastest in coming years in a number of San Diego's key clusters — from clean tech to action sports. Some of these hot industries are large, like biotech. Others, like surf board makers, are very small by comparison. But the 10 we profile here should all grow at a good pace, creating jobs and opportunities for other businesses that serve them.
They also warrant the attention and support of our elected leaders.
Of course, what's hot today might not be tomorrow, particularly when it comes to emerging technologies. Efforts to make biofuels, for instance, got hit because of the steep drop in the price of oil. Not many saw that coming a few years ago.
However, most of these industries appear prime to take on a greater role in both San Diego and nationally.
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1. Biotech: Genomes
In the movie, “The Graduate,” Dustin Hoffman was advised to pay attention to this one particular field:
In San Diego today, the word is:
Little wonder. After all, one local company, Illumina, is the world's leader in genome-sequencing technology and was named the “world's smartest company” by the MIT Technology Review last year.
San Diego is also home to the J. Craig Venter Institute, which has been a leader in genomic research. Venter, who was one of the first to sequence the human genome, started it.
“Mapping genomes leads to better pharmaceutical care and better medical care,” said Michael Combs, research manger at the San Diego Economic Development Corporation
This is not the stuff of science fiction any longer. Illumina created a way to read a person's genome for as little as $1,000, a cost that makes the application practical, as well as a game-changer.
The biotech cluster is San Diego's most powerful. Not only does it attract the most venture capital dollars, it also has the highest pay, with employees averaging $107,000 annually.
Having such genome-centric powerhouses helps attract other like-companies to set up shop in San Diego, Combs said. And that leads to more advances because “there's more risk taking in San Diego,” he said.
Indeed, in 2012, former President Bill Clinton declared San Diego the “human genome research capital in America.”
The financial payoff is mighty. Jay Flatley, CEO of Illumina, said more than a year ago that the market for sequencing would reach $20 billion. He told Forbes in April that he was off. “If you were to ask us what we think it is today, it’s substantially bigger.”
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2. Wireless medical devices
Creating new-age wireless medical devices is a merger of several industries from a number of clusters in San Diego: Health care, biotech, and, of course, wireless. This is synergy at its best, proponents say.
Creating instruments that can communicate with and complement each other is a trend that should remain strong, Combs said. One goal is to reduce the number of devices in hospitals, with the resulting streamlined systems being more efficient and interactive, he said.
West Health, a health care research organization based in San Diego, said that improving so-called interoperability could achieve savings as great as $30 billion.
“Today, our nation’s healthcare system is piece wise excellent, but chaotic and dysfunctional in the aggregate,” according to a West Health report on the subject.
“Clinicians are often left to rely on stale and incomplete information. Many innovative, life-saving device technologies cannot share vital data about their function or the patients they are treating."
One report showed the total wireless medical device global market growing from $7.52 billion in 2013 to $17.71 billion by 2020.
Again, San Diego is primed to be a leader in this field, Combs said. It is, after all home to Qualcomm and other leading wireless firms. The region also has a thriving biomed industry. Additionally because the region's health care industry is based in such a thriving technology hub, it's more willing to adopt new concepts.
“This is a big opportunity for us,” Combs said.
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3. Cyber security
Not long ago, cyber security was a little known industry and normally grouped in the defense cluster. Well, we all know how that's changed. Just recently, as many as four million former and current U.S. federal employees had their personal information stolen, probably by Chinese hackers, U.S. officials say.
Remember how Sony Pictures Entertainment was hacked at the time it was prepared to release the movie, “The Interview,” a political satire about an assassination plot against North Korean leader Kim Jong-um?
Such cases have led to a much greater emphasis on cyber security, where San Diego has had a strong presence because of its military ties, Combs said. “It's going to do nothing but grow,” he said.
Indeed, the EDC has advocated the creation of a cyber security cluster, to help the industry move forward.
The leader in San Diego’s cyber security industry is the United States Navy Space and Naval Warfare Systems Command (SPAWAR), which employs about 3,095 cyber security workers. But the field is growing beyond defense, noted Combs. The private sector is very concerned about breaches, as well.
According to the EDC, the total economic impact of the cyber security industry in 2013 was $1.51 billion. That's as much as hosting 3.3 Super Bowls or 8.5 Comic-Cons each year, it said.
“There is a robust demand for cyber security solutions,” according to a 2014 report by the National University System Institute for Policy Research. “The U.S. military has significant cyber security assets in San Diego, and the Department of Defense recently proposed a five-year cyber security budget of more than $23 billion.”
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Look, up in the sky. It's a bird, it's a plane … no, it's another drone. They seem to be everywhere of late. And because of that, the industry is likely to grow — particularly if the commercial use of drones increases.
Amazon, for one, wants to deliver its packages to you by using drones through a system called Prime Air. According to Amazon: “It looks like science fiction, but it's real. One day, seeing Prime Air vehicles will be as normal as seeing mail trucks on the road.”
Indeed, all unmanned systems — be it ground transportation or underwater vehicles — could see more R&D and investment, Combs said. “There's a lot of research on how we can move vehicles without people driving them,” he said.
Drones hit the spotlight for their defense purposes, and that mission goes on. San Diego is home to two leaders in drone research and design, General Atomics Aeronautical Systems and Northrop Grumman.
“Currently, 60 percent of technology development in unmanned systems is performed in San Diego County,” according to the EDC. “With the rise in commercial and consumer uses, this industry sector is well positioned to carry the aerospace industry forward and continue to attract top aerospace and software engineering talent to the region.”
UAVs are part of the aerospace cluster, which has a long history in San Diego. Drones could be a significant part of its future if the military continues to invest in them and if regulatory issues are settled regarding commercial uses.
Drones continue to be used in innovative ways. European airliner EasyJet plans to use them to inspect planes to look for any damages. They can hover above the aircraft, giving views otherwise not easily accessible.
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5. Solar and Electric Vehicles
That big ball of fire in the sky? San Diego is taking advantage of it. When it comes to solar installations, we're No. 2 in the nation. We're also big on electric vehicles, with the city being ranked the fourth “friendliest” for electric car drivers by ChargePoint, the world's largest charging network.
Those two are among the leaders in San Diego's Cleantech cluster.
“When it comes to adoption in San Diego, their numbers are very high,” said Jason Anderson, president and CEO of Cleantech San Diego.
Rooftop solar panels have become commonplace, he noted. There are more than 56,000 rooftop solar customers (homes and businesses) in the SDG&E territory, Cleantech notes.
That's helped create jobs. There are now more than 11,000 solar workers in Southern California. And the industry expects to see further growth.
“We anticipate another record year for solar in the U.S. in every market segment,” according to a recent report by the Solar Energy Industries Association. “The residential juggernaut will continue to roll on, while the non-residential market will pick up, particularly in California and New York.
Electric vehicles are also becoming less than a rarity on our streets and freeways. We now have almost 17,000 of them in the SDG&E area. While San Diego doesn't produce the cars, they do create economic impact, Anderson said.
The cars need charging stations and servicing, he said. Some businesses promote accessible charging stations to attract customers, he added. Drivers can use mobile apps to locate them. While the car is being charged, they can run errands.
For example, Caesars Entertainment has free charging stations at many of its casinos, including Harrah's Resort Southern California in Valley Center. It's going green in more than ways than one.
Yes, oil prices are down, but gas in Southern California continues to be high for a host of reasons, including strikes at two refineries. That bodes well — for the EV industry at least.
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Photo by Jaryl C. on Yelp
6. Craft Beer
Likely, no other industry's successes have been as well documented as San Diego's craft beer industry. It might be because many journalists like beer. And it might also be because it's been a startling start-up surprise.
A recent report by the National Institute System for Policy Research noted the rapid ascent: “The industry’s economic value to the region has doubled in the last three years, from an estimated $300 million ($299.5) in 2011 to $600 million ($599.4) in 2014. This surpasses the estimated economic impact of the 2015 Super Bowl to the Arizona state economy ($500 million).”
And it's not showing signs of slowing: “The number of breweries and brewpubs has more than doubled,” the report said. “At the end of 2014, there were 97 breweries and brewpubs in San Diego County, a 165% increase from 2011’s tally (37).”
Craft beer is part of the specialty foods and microbreweries cluster, according to SANDAG's catalogue of them. It's the smallest of San Diego's clusters by employment. SANDAG also notes, though, how it is seeing significant growth.
However, there's one concern. The National Institute System for Policy Research warned that Agricultural is one of the main industries that could be hurt by California's drought.
However, the beer industry is not as water-intensive as some might think.
“The most water-intensive part of the beer making process, however, is in the agriculture,” according to Quartz, a business news website. “But before you start boycotting Sierra Nevada, keep in mind that the vast majority of hops and barley come from out of state, grown in places where rain is more plentiful.7.
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7. Desalination and Clean Water Technology
News break: We're in a drought. A bad one. That's resulted in new efforts to broaden our water supply via new technologies, such as desalination and wastewater recycling, to name but two.
These would fall under what's sometimes called the blue tech cluster. The biggest project to date is the $1 billion desalination plant being built in Carlsbad. When completed, it could provide up to 7 percent of San Diego County's drinking supply.
It's one of as many as 15 plants that could be built along California's coast in the coming future. This technology is not without its critics. The plants use a lot of energy and discharge salt back into the ocean, impacting marine life. However, efforts are being made to reduce the damage through new technologies.
Additionally, the city of San Diego has approved a long-term, $2.5 billion effort to recycle wastewater, to further reduce the region's dependence on imported water. We import 85 percent of our water.
The Pure Water San Diego project calls for three future water purification facilities that will produce one-third of our drinking water by 2035.
How big of an industry is this? Pretty big — about $300 billion globally, according to a recent report by Goldman Sachs.
“As countries seek to address water challenges, companies in the water sector have seized on the business opportunity to provide solutions,” it said.
The industry includes 32 sectors like desalination, wastewater treatment and water-efficiency technologies, the report noted.
It's not just governments looking to conserve. Water-dependent industries are also are seeking technologies to become more water stingy — and viable.
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Surf's up — for more advanced, eco-friendly boards, that is.
Locally, there are a number of surfboard makers who are bummed about how most boards are currently made. Primarily, they are comprised of polyurethane — which is petroleum based. That's gnarly — for the planet.
So they're making boards in a more sustainable fashion.
Surfboard makers are part of San Diego's action sports cluster. It includes golf and skateboarding manufacturing and activities like sailing, mountain climbing and biking.
Just recently, students at UC San Diego help create a new surfboard — made of algae. Stephen Mayfield, a professor of biology and algae geneticist at the school, led them. He's also a surfer.
“An algae-based surfboard perfectly fits with the community and our connection with the ocean and surfing,” he told the UC San Diego News Center.
He noted the irony of surfers taking to the waves on current mass-produced boards.
“As surfers more than any other sport, you are totally connected and immersed in the ocean environment,” he said. “And yet your connection to that environment is through a piece of plastic made from fossil fuels.”
Surfing's global market is expected to reach $13.2 billion by 2017, according to a report by Global Industry Analysts. It's doubtful the eco-friendly start-ups will put much of a dent into that, but this is an artisan movement that appears to have similarities to the craft beer industry that began with just a few like-minded entrepreneurs.
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The world's population continues to grow and we're depleting resources because of it. Globally, we're over-fishing and putting a serious stain on the supply.
One possible solution: aquaculture. That's where fish are grown in enclosed areas and harvested for food. However, there are efforts to do so in more advanced ways than current practices. San Diego is prime for this, given our location — next to an ocean.
The most ambitious effort is the proposed Rose Canyon Fisheries, a project being undertaken by the nonprofit Hubbs-SeaWorld Research Institute and the private equity firm of Cuna Del Mar.
At 300,000 square feet, it would be the world's largest aquaculture endeavor and produce as much as 11 million tons of fish annually.
“This is very mission-driven,” said Combs, of the EDC. “They want to make it more sustainable. It's not just a typical fish farm.”
A number of the world's fish farms — which are growing in number — have pollution problems, given the concentration of fish in small areas and in shallow waters. The waste they produce can cause contamination. The Rose Canyon Fisheries would be so far offshore that the waste would not be an issue. In deeper water, it would disperse.
This is critical not just for the world, but also for us. The U.S. imports 90 percent of the fish it consumes. Our seafood trade deficit has reached more than $11 billion.
“We’re going to approach this as it’s a recognized need and it’s good for our country,” Don Kent, president and CEO of Hubbs SeaWorld Research Institute, and director and executive of Rose Canyon, told The Log, a boating publication. “We’re doing very little aquaculture. We can become self-sufficient. There is a lot more recognition for the need for this.”
Indeed, many nations are much more aggressive. The U.S. ranks 15th in aquaculture production, according to the United Nations.
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Get out the champagne and aim for the bow, already. San Diego is building ships. The shipbuilding industry is part of the traditional maritime cluster, and it's booming.
According to state employment figures, local shipbuilding jobs have jumped 18 percent in the last year — leading all job categories. Combs, of the EDC, noted how shipbuilding contracts from the federal government have a tendency to “ebb and flow.” However, right now, the industry is seeing consistent growth.
Much of that spark that is coming from Barrio Logan-based General Dynamics NASSCO, the largest shipbuilder on the West Coast. It's been building both Navy and commercial ships.
“We have 10 ships that we’re going to be building between now and about 2017,” Kevin Graney, NASSCO's general manager, told KPBS. "We will end up delivering six ships in 2016.”
Just a few years ago, when the recession stalled building, the shipbuilder was laying off workers. Now, its hiring. And that's a good thing, considering the average salary for a shipbuilder worker is more than $62,000 according to the EDC. In all, the region employs more than 6,200 such workers.