November 08, 2011

Chip Manufacturing Finds A Place In Upstate New York

By: Molly Cagwin

Source: Crain's New York Business

Warren Montgomery joined IBM out of college 30 years ago, expecting the lifelong employment and blue-chip perks that others in his Hudson Valley family had enjoyed: weekends at the company's country club, car loans made easy, and those silver spoons.

“When your kid was born, you'd get a silver spoon,” he said. “It was as if the kid was born with a silver spoon in his mouth because he was born to an IBMer. Why would you want to go anywhere else?”

Layoffs in the early 1990s changed all that. IBM's vulnerability startled employees and signaled a crisis in the state's high-tech economy. Mr. Montgomery jumped ship, embarking on a nearly two-decade odyssey that has mirrored the volatile growth of global computing and New York's struggle to reclaim its perch in the nation's high-tech economy.

As jobs and skilled workers left the state, so did Mr. Montgomery—for Europe, then for Silicon Valley and, as chip manufacturing moved north, to Oregon's Silicon Forest.

Now, after more than $2 billion in state commitments, New York's tech sector is back—as is Mr. Montgomery. Improbably, the epicenter is Albany, known more for bureaucracy than innovation.

Mr. Montgomery's new employer is SUNY Albany's College of Nanoscale Science and Engineering, which has become a catalyst in the race to build ever-faster, ever-smaller gadgets. The effort has attracted hundreds of companies and created thousands of lucrative jobs that are the gold standard of employment in the new economy. But the initiative has taken time to bear fruit and will take many more years of sustained public and private investment if the state is to keep pace in this hyper-competitive industry.

“Clearly, it's a long-term play,” said Daniel Armbrust, chief executive of Sematech, an association of semiconductor manufacturers. “When people ask me, 'Why did you relocate this year to Albany?' I tell them it's because of what happened a decade ago.”

It was in 2001 that the state invested in a handful of education “centers of excellence” intended to spur high-tech growth. SUNY Albany's Alain Kaloyeros, a charismatic physics researcher who wears designer jeans and drives a Ferrari, proposed developing nanotechnology, which focuses on taking advantage of the way matter 1/80,000th the width of a human hair behaves.

Mr. Kaloyeros, emerging as the leader of the university's effort, took a novel approach. He married academic research with private-sector commercialization, focusing on the development of the next generation of silicon chips.

The school has spent more than $1 billion to build cutting-edge research “clean rooms”—the hyper-sanitary labs where engineers in white “bunny suits” manipulate light and chemicals to etch out the integrated electrical circuits used in today's electronics.

Companies in the computer chip supply chain, facing exponential increases in development costs, relocated employees to the nanoscience center—which in 2004 became a college—to conduct research and collaborate with competitors.

“If a company decides to leave, God bless them, but they cannot take a single piece of equipment with them,” he said.

They haven't left. Indeed, companies have begun flocking to the college and to the area; more than 200 have workers at the campus. The semiconductor industry in Albany has bloomed to more than 400 companies, more than New York City or the mid-Hudson Valley. The college estimates that its funding has spurred billions of dollars in private investments that have helped create 12,500 high-tech jobs statewide, a number it expects to double within 10 years.

The growth has given chemists like Mr. Montgomery, the former IBM employee, newfound status, even if locals have not yet begun to appreciate what's happening.

“We develop technology before anybody else in the world. Not just New York, the world,” he said. “When I go to conferences, people are listening.” Research at the college will be put into practice by Global Foundries. The company, formed by semiconductor company AMD and the investment arm of Abu Dhabi, is building the state's first chip fabrication plant, just north of Albany. The $4.6 billion “fab” will have a 300,000-square-foot clean room that is far more hygienic than a hospital operating room. Its construction, which has provided hundreds of jobs, would not have happened without $1.2 billion in state incentives.

By the end of next year, more than half of its 1,400 employees will be technicians who, with at least a two-year degree, will earn salaries of $30,000 to $60,000.

The focus on chip manufacturing has been expanded. Architectural and engineering firm EYP, which specializes in designing energy-efficient research buildings, moved its headquarters to the campus. It hopes to be among the first to benefit from nanotech research into solar electricity.

“We don't do the research,” said Chief Executive Tom Birdsey. “But we're the ones that can say to those researchers, 'Gee, it would be really nice if there was a thin-film photovoltaic material that we could put on the exterior of a building or the inside of the walls where the sun shines.”

The company also has a practical reason to be on campus: It is helping to build the school's newest lab, which will focus on developing even more advanced chip manufacturing. Toward that end, in late September the Cuomo administration, Intel, IBM, Global Foundries, Samsung and Taiwanese chip maker TSMC announced a $4.4 billion private investment, plus $400 million from taxpayers, over the next five years.

The deal highlights how the collaborative model pioneered by Dr. Kaloyeros is being replicated across the state. The former Infotonics Center in Canandaigua outside Rochester was a center of excellence that went bust. But last year it merged with the nanoscale college to build clean rooms for academics and private industry to develop nano-devices, such as insulin monitors, used in health care. It will get about 300 jobs out of the deal.

Mr. Kaloyeros, whose $763,289 in earnings last year made him the second-highest-paid state employee, believes the latest investment will lead to the “the ultimate prize:” a second fab for upstate—and hundreds of additional jobs.

Hopes that upstate New York will become a high-tech manufacturing hub may be unrealistic because fabs are so expensive to build.

“There aren't going to be, out of the blue, five factories going up in the next five years,” said an Intel spokesman, Chuck Malloy.

To glimpse Albany's future, look south—to Texas. “Albany is the new Austin,” Mr. Malloy said.

Two decades ago, that city transformed itself into a poster child of the semiconductor industry, luring Sematech there in 1987. Since then, Texas' investments in manufacturing decreased as other high-tech sectors, like software, took off. Sematech traded Texas' capital for New York's.

“Albany is at a tipping point,” Sematech's Mr. Armbrust said. “The desire to work across company boundaries created Silicon Valley. And that's what's happening here.”