HI. TECH
Military R&D, while promising, relies heavily on Pentagon, Inouye

By John Duchemin
Advertiser Staff Writer

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Hawai'i's most ardent high-tech advocates spend much of their time talking about the state's potential prowess in industries that don't yet exist here, or at least not in force. Witness biotechnology, an industry that seemingly would revolve around the new University of Hawai'i Medical School, which hasn't even been built.

But at least one sector — the military research industry — has enough employers, employees, and financial power in Hawai'i to offer a tantalizing vision of a possible future. In fact, without this industry, Hawai'i would not have much of anything to call "high-tech."

The sector consists of a loose grouping of companies whose primary income derives from military-financed scientific research. With the military's need for new technology seldom greater and money for homeland security increased, at least a half-dozen Hawai'i firms have carved out small but lucrative niches, and increasingly have been able to take on major projects in cooperation with, or competition against, defense-industry juggernauts such as Raytheon and Boeing.

Hawai'i companies including advanced ship-hull designer Navatek, optical sensor designers Science & Technology International and Novasol, and boutique research firm Oceanit have recently attracted tens of millions of dollars in support, allowing them to pay the salaries of several hundred highly educated researchers and technicians. Mainland-based research firms Orincon and Trex Enterprises have recently seen their Hawai'i subsidiaries grow into significant businesses. And conventional software firms such as Honolulu-based CTA have profited from the Navy's efforts to expand its high-security communications network.

This still-small industry, more than any other sector, represents the early vestiges of a "critical mass" of employees, investment capital, and commercial activity that could turn high-tech Hawai'i into a self-perpetuating system. Military R&D firms have managed to lure dozens of kama'aina home from lucrative Mainland jobs, and have provided local employment for some of UH's most talented graduates. Some of the firms are engaged in joint research with UH professors; some have attracted venture capital for spin-off companies that will try to "commercialize" their technology.

Medical device maker Hoana Medical, for instance, is an Oceanit spin-off that has received millions in private money since its inception in 2001. Trex Hawaii spun off Loea Corp., a high-speed wireless company that, among other projects, built a communications link between UH's Coconut Isle research facility and O'ahu. Navatek parent company Pacific Marine has retrofitted a hydrofoil, based on a new Navy hull design, for lease to a San Diego ferry service.

In sum, the military R&D sector has managed to prove that high-tech backers' dreams don't all start in pipes. That said, Hawai'i's military research industry is far from gigantic, and it is addicted to hand-outs from the world's largest venture capitalist, the U.S. government. Military firms' fortunes depend particularly on the good graces of U.S. Sen. Daniel Inouye, who frequently helps the local research firms get their projects included in annual defense appropriations bills.

If Pentagon spending slackens or Inouye leaves office, the Hawai'i military research industry could evaporate overnight; most of the firms haven't yet proven capable of sustaining themselves without outside help.

By Hawai'i standards, however, this fledgling industry has a good spin-to-content ratio. While not yet a self-sustaining reality, it's certainly more than an unsupported dream.