In Albany, a boom based on microchips

Firms in Upstate New York are joining together for a new effort to keep the United States at the center of the semiconductor industry.
By Howard Schneider
Washington Post Staff Writer
Tuesday, November 2, 2010; 5:43 PM

ALBANY - The economic downturn has hit upstate New York as hard as anywhere in the country but an unusual, high-tech endeavor is taking shape here that could involve billions of dollars in manufacturing investment and possibly thousands of new jobs.

State and federal officials are aiming to reassert the nation's traditional leadership in semiconductors by providing hundreds of millions of dollars toward a cutting edge research institute and the construction of a $4.5 billion silicon chip manufacturing plant.

The College of Nanoscale Science and Engineering (CNSE) has attracted more than 200 companies to an ever-expanding campus, where competitors work side by side in labs and on the same machines. At an industrial park 20 miles north, the state of New York has contributed $1.3 billion in grants and tax credits to subsidize the semiconductor plant.

This effort involves a degree of government involvement that Americans have long eschewed on the grounds that the public sector should not tilt the commercial playing field toward specific industries or companies.

Economic analysts have often warned that core industries in the United States risk falling behind their foreign competition because companies in China, South Korea and elsewhere benefit from government subsidies and other public support. But around Albany, federal and state governments are adopting a similar approach to an industry central to U.S. technological leadership and important in the Obama administration's efforts to boost U.S. exports.

"We are the last line of defense for the U.S. semiconductor industry," said Alain Kaloyeros, a physicist and head of CNSE.

The college opened at the State University of New York in 2001, and since then has grown to include an industrial-scale, 80,000-square-foot "clean room" - the hyper-hygienic facility needed to manufacture or experiment with silicon chips - as well as a collection of equipment perhaps unique in the world. The latest acquisition is a $65 million tool that uses extreme ultraviolet light to produce the world's smallest integrated circuits, and is one of only two in the world.

Reversing the dominant pattern, overseas companies are relocating here, and construction workers who specialize in building semiconductor plants are preparing to fight winter weather in New York instead of, for instance, Malaysia's tropical heat.

GlobalFoundries, a partnership between AMD and the investment arm of the Middle Eastern emirate Abu Dhabi, embarked on the new $4.5 billion plant at the depths of the recent downturn, shunning alternate locations such as Germany and Singapore - highly advanced manufacturing economies where the enterprise also owns plants.

Despite these positive developments, it's uncertain whether the strategy being pursued in upstate New York offers a model for the wider U.S. economy. Although the Obama administration has provided funding to advance the development of electric-car batteries and other green-energy technologies, policy experts do not suggest that the U.S. government could win back more basic types of manufacturing by simply outspending Asian countries such as China.

But in this case, industry and government officials argue that the approach is helping ensure that the United States keeps its traditional edge in an industry that remains a source of export strength. Intel, a major maker of silicon chips, recently announced major new investments in the United States, while opening its first chip plant in China.

These investments mean jobs not just for PhDs working in labs or engineers developing new gadgets but also for heating contractors who maintain clean rooms and the heavy-equipment operators responsible for sensitive pieces of machinery.

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