Reshoring Semiconductors with the Chips Act: Key Lessons from Albany, New York

Congress is currently considering legislation to promote “reshoring” semiconductor manufacturing to the United States. The Covid-19 pandemic and its associated disruption of global supply chains has revealed that while semiconductor chips provide the foundation for all advanced industries and are central to national defense, the United States has become dependent on offshore production, mainly in Taiwan and Korea, for its most advanced chips. But while the need for reshoring U.S. chip production is clear, the path forward is not, reflecting the daunting array of technological, investment, and workforce challenges that characterize semiconductor manufacturing. In this context, the state of New York’s recent, successful effort to establish world-class semiconductor research and manufacturing capabilities in the area around Albany offers important perspectives.

The current chip shortage, which is having adverse ripple effects across the U.S. economy in key sectors ranging from autos to smartphones, underscores what is at stake. After decades of offshore movement of chip production, the United States can no longer supply our needs from domestic sources, critical as some of those needs may be. The U.S. share of global semiconductor fabrication has declined from about 40 percent in 1990 to 11 percent at present. Recognizing the threat posed by dependency on foreign chip production and global supply chains, the U.S. Innovation and Competition Act (USICA), passed by the Senate in 2021, and the CHIPS for America Act, set forth in the 2021 National Defense Authorization Act, envision federal outlays of $52 billion to reverse the erosion of U.S. chipmaking capability. This is a good start, but only that.

Standing alone, major public incentives for investments in semiconductors, while essential, are only one aspect of the challenge of expanding U.S. capability in what is the most complex industrial process in the world, involving operations at the nanoscale level (involving circuit widths of roughly one ten-thousandth of the width of a human hair), using machines of extraordinary precision, employing exotic materials and gases, and requiring the virtually complete absence of contaminants such as moisture and dust particles. Mastering these processes in an environment in which technology continues to advance with destabilizing speed is, at best, extraordinarily difficult. A number of other technologically-advanced economies that have made major public outlays to encourage local semiconductor manufacturing—including Japan, which once had the world’s largest market share for chips. The European Union, while still a leading center of advanced science and engineering, especially in the Interuniversity Microelectronics Centre (IMEC)—is nonetheless largely dependent on chips fabricated abroad.

Key Lessons from Albany

New York’s recent achievements—where public investments translated into successful local semiconductor research and manufacturing operations—therefore warrant the attention of federal- and state-level policymakers.

  • Today New York’s capital region, comprised of Albany, Troy, Schenectady, Saratoga Springs, and nearby counties, is clearly one of the world’s leading centers of applied research in nanotechnology.

  • The capital region is the site of the only major semiconductor manufacturing foundry in the United States, GlobalFoundries. Its research facilities recently attracted Wolfspeed, a major producer of silicon carbide chips, to nearby Marcy, New York.

  • The capital region remains a magnet for investment in semiconductor research and manufacturing, as well as a center for production of specialized chips needed by the U.S. defense establishment.

Leverage Existing Assets. One of the keys to New York’s success was the ability to build upon an educational and industrial foundation that supports high-tech research and manufacturing. The capital region has excellent universities, including leading engineering schools like the Rensselaer Polytechnic Institute (RPI) and Union College. The state has invested heavily in schools at all levels, from K-12 through community colleges, to four-year institutions and advanced graduate and postdoctoral programs. New York also had a priceless industrial heritage of older technology-intensive firms like IBM, General Electric, Kodak, and Corning. While these firms downsized substantially in the 1980s and 1990s, their former employees and executives represented a pool of skilled and disciplined workers and strong leaders. IBM had a longstanding presence in semiconductor manufacturing at East Fishkill, New York, and was a pioneer in the research into the emerging science of nanotechnology, the manipulation of matter at the molecular level. New York’s leaders built on this legacy in creating what is now known as “Tech Valley” in the capital region.

Invest in University Research. This educational and research foundation did not emerge overnight. For over a half a century, New York made major and sustained public investments in university education, research, and research infrastructure in thematic scientific areas that were likely to foster economic development. A principal focus of this effort was the creation of a research center for nanotechnology at the State University of New York at Albany (SUNY Albany) in close cooperation with IBM and subsequently other industrial partners. State investments, in conjunction with IBM’s, for equipment, buildings, and staff, were made in a state university, sidestepping questions of public support for individual firms.

Nanotechnology refers to the manipulation of matter with at least one dimension sized at 1 to 100 nanometers (nm), with a human hair being 80,000 to 100,000 nanometers wide. By the end of the 1990s, the dramatic potential of nanotechnology was becoming broadly recognized as relevant in fields such as electronics, microfabrication, medicine, biotechnology, and advanced materials. The first major industry to engage in manufacturing at the nanoscale level was the semiconductor industry, and during and after the 1990s, New York’s creation of a nanotechnology education and research center of unprecedented scope drew semiconductor companies from around the country to engage in collaborations relevant to their businesses. In 2004, Governor George Pataki announced the creation of the College of Nanoscale Science and Engineering (CNSE) at SUNY Albany, the first nanotechnology college—or “NanoCollege”—in the United States. CNSE recruited faculty with industry and engineering backgrounds and offered curricula that emphasized the practical applications of nanotechnology with commercial potential.

Cooperate Closely with Industry. New York policymakers have a long history of working with industry to foster technology-based economic development. State leaders consulted closely with companies like IBM and GE with respect to the need for enhanced investments in education and research infrastructure. In the 1980s, New York policymakers reached out to industry research consortia such as the Semiconductor Research Corporation (SRC) and Sematech to attract semiconductor industry research projects to universities in the capital region. State and regional economic development organizations functioned as think tanks supporting research into international competitive conditions and the practical requirements of high-tech manufacturers—industrial sites, engineering requirements, technological hurdles, and the policies of other countries and regions.

The NanoCollege became a “research Switzerland”—a neutral site where industrial competitors could collaborate to address common technological challenges, sharing the costs and risks, and ultimately the knowledge gained. Importantly, the NanoCollege featured actual state-of-the-art semiconductor manufacturing facilities where research on novel manufacturing techniques, new equipment, and new materials, could be conducted in a commercial-scale environment. The state of New York and the companies involved shared the cost of the research, and the companies could then apply the lessons learned in their own manufacturing operations—a critical competitive advantage. The NanoCollege became a magnet for high-tech research, starting with IBM and then drawing in companies such as Advanced Micro Devices, Toshiba, ultimately the Sematech research consortium, and supply chain and equipment firms like Advanced Semiconductor Materials Lithography (ASML), Applied Materials, and Tokyo Electron. An important byproduct was a steady stream of graduates from the NanoCollege with practical knowledge and skills relevant to the semiconductor industry.

As the state’s university-based semiconductor research programs grew in scale and scope, at SUNY Albany and CNSE, academic and industry research consortia were formed through unique institutional arrangements that accommodated industry requirements. Academic curricula were developed in consultation with the industry with respect to its anticipated requirements. These arrangements differed from academic/industry relations in some other countries and regions, which are often strained. One official in the Pataki observed that the governor wanted state universities to “constantly, consistently and clearly focus on industry relations.”

Foster a Local Ecosystem. High-quality research facilities were not the only goal of New York policymakers. New York’s leaders always saw the state’s investments in research as a means to an end—the establishment and expansion of high-tech manufacturing operations in the capital region, most notably in semiconductors. Policymakers recognized that semiconductor manufacturers had locational options around the world with many regions eager to attract high-end manufacturing. Reflecting this competition in recent decades, most of the industry’s investments had been outside the United States, driven by a variety of factors, such as large government incentives but also workforce quality, regulatory issues, and prosaic factors such as the availability of high-quality sources of water and electric power. New York’s regional and state leaders addressed all of these factors in a concerted and sustained effort to attract semiconductor manufacturing to the region.

  • Local Research Centers: The research infrastructure noted above—most notably CNSE—represented an exceptional resource available to manufacturers located in the region to address technological challenges encountered in production operations and to test new tools, materials, and processes

  • Workforce: State and local educational leaders established curricula and research infrastructure at regional universities, community colleges and K-12 schools for educating and training a workforce with skills relevant to the needs of semiconductor manufacturing. Importantly, this effort sought to train not only PhD scientists and engineers, but the technicians, operators, and construction workers with the specialized skills needed to build and operate semiconductor manufacturing plants—what one New York leader called the “blue collar men and women of the future.”

  • Regulation: Recognizing that manufacturers seeking to locate in the United States sometimes choose other venues with less regulation, local New York development organizations worked very effectively to surmount environmental, zoning, and other regulatory issues and to present semiconductor manufacturers with a “shovel-ready” site near Saratoga.

  • Manufacturing Infrastructure: Local development and business organizations and a public utility, National Grid, worked together to ensure that by the time a semiconductor plant became operational, the necessary requirements for power, water, and transportation were all in place.

  • Incentives: While most of New York’s investments in semiconductors were directed at universities, not companies, policymakers recognized the need to present manufacturers with incentives that at least matched those offered in other countries and regions. They succeeded. The state’s incentives—roughly $1.2 billion—surpassed competing offers of other regions.

  • Results: The substantial incentive package was able to leverage many times that amount in capital investment by semiconductor manufacturer Advanced Micro Devices and its corporate successor, GlobalFoundries, while attracting and supporting a substantial supply chain of specialized companies. The terms for the incentives required 1,200 jobs to be created and retained, but in fact, Global Foundries produced more than three times the expected jobs and continues to invest in the region. Moreover, the fab has generated a steady and substantial flow of tax receipts to the state and stimulated economic activity across the region.

Maintain Policy Continuity. Perhaps one of the most important features of New York’s nano-initiative is its continuity. Despite strong partisan differences, successive Republican and Democratic governors demonstrated an abiding commitment to technology-based economic development for over half a century. Newly elected governors built upon, rather than sought to undo, the work of their predecessors, a phenomenon rare in state politics, but which made rational planning and both small- and large-scale investments possible over an extremely long time horizon.


The proposed federal effort to reshore semiconductor manufacturing is likely to face challenges more complex than the challenges confronting New York—including the national security dimension and the need to restore lost capabilities such as packaging—and as many observers have noted, there is no single blueprint for successful development of a high-tech industry. Nonetheless, the New York experience is a powerful model for other regions, and facilities as the federal government embarks on this complex effort to bring the world most advanced manufacturing to U.S. soil.

New York’s “industrial policy”—for that is what it was—succeeded in creating a thriving center of semiconductor research and manufacturing in the United States at a time when the trends were all in the opposite direction. New York did this with consistency and commitment and with a tiny fraction of the public resources that will be available to federal policymakers if current legislation is enacted. Importantly, the state’s efforts successfully leveraged far larger sums of private investment capital—which will be an absolute prerequisite for the success of any federal effort.

It will also be important for policymakers to leverage the New York’s capabilities, not only for its unique assets, but because the facilities are in place and operational with existing partners and processes. Reinforcing the Albany center and drawing on its lessons for other centers in a spoke and wheel model will accelerate any U.S. national effort, a critical concern in this rapidly evolving industry. It is important to appreciate the substantial capital costs, and most of all, the long lead time that will be required to replicate the facility.

It is also worth emphasizing that despite the fractious rough-and-tumble that characterizes New York politics, both parties were able to agree upon and work toward common objectives over a very long span of time. That experience, and the facilities themselves, can serve as a model and a resource for federal policymakers as they seek to restore our capability in this most critical industrial sector.

Charles W. Wessner is a senior adviser (non-resident) with the Renewing American Innovation Project at the Center for Strategic and International Studies in Washington, D.C. Thomas R. Howell is senior counsel at Dentons.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s). 

© 2022 by the Center for Strategic and International Studies. All rights reserved.

Charles Wessner
Senior Adviser (Non-Resident), Renewing American Innovation Project

Thomas R. Howell

Senior Counsel, Dentons