Intel's interest in building fab in New York goes back 20 years

Intel's interest in building fab in New York goes back 20 years

As Biden and Schumer push $50 billion chip program, Intel says it's looking at NY

MALTA — When Intel revealed Wednesday that it was looking at New York state to build a new computer chip factory, Jack Kelley wasn't surprised.

Kelley, a local economic development consultant and commercial real estate broker, knows Intel very well from his days working for the Saratoga Economic Development Corp.

During the 1990s and early 2000s Kelley and the late Ken Green, SEDC's president at the time, took numerous trips to Intel's manufacturing campus in Chandler, Ariz., to try and convince the chip making giant to build a new computer chip factory in the middle of Luther Forest in Saratoga County.

As it turned out, it was GlobalFoundries, not Intel, that built a chip factory in Luther Forest.

But Kelley says that the relationship forged with Intel over 21 visits to Chandler over eight years had a lasting impression on Intel's leadership, which he said has always held New York state and the Capital Region in high regard.

"It's all coming together, the vision that Ken Green and others and I had is really coming full circle," Kelley said of Intel's renewed interest in upstate New York. "Intel was our mentor."

Indeed, when Kelley was pitching Intel more than two decades ago,  New York state was an up-and-coming player in the global semiconductor industry.

It's brightest star, IBM, opened a $2.5 billion computer chip factory in East Fishkill in 2002, one of the most advanced in the country, with a $500 million investment from New York state, which was also pouring hundreds of millions of dollars into the Albany Nanotech complex where IBM and other chip makers collaborated on next-generation chip technology.

Last week, Intel announced it is launching a major research program with IBM at Albany Nanotech, home to SUNY Polytechnic Institute, which trains the next generation of semiconductor engineers and scientists.

The research partnership with IBM is part of a massive strategic pivot by Intel CEO Patrick Gelsinger, who designed some of Intel's most important chips in the 1980s and was named CEO in February.

Intel is entering the so-called foundry business making chips for other companies that don't have their own factories, which can cost up to $15 billion these days. Gelsinger announced last week that Intel would spend $20 billion to build two new fabs in Arizona — and it would announce within a year other new fabs.

An Intel spokesman confirmed to the Times Union earlier this week that New York state is in the running for one of those future fabs.

This isn't happening in a bubble. Senate Majority Leader Chuck Schumer of New York has been leading the charge to convince Intel, GlobalFoundries and other chip makers like Samsung to build new chip fabs, short for fabrication plants, in the United States as part of a concerted effort to ensure the Defense Department and the U.S. electronics industry have a secure and sustainable chip supply.

The global pandemic has exacerbated the weakness of the U.S. chip supply, forcing auto makers to idle factories as chip supplies have dried up. Asian countries, and especially China, have increasingly dominated the U.S. in chip manufacturing. Some parts of the chip supply chain are located exclusively in Asia.

The solution being pushed by Schumer and President Joe Biden is a proposed $50 billion fund that would provide financial incentives to chip makers to build new U.S. factories and spend more freely on research.

The fund, which Biden unveiled Wednesday as part of his $2 trillion infrastructure plan, would also establish a National Semiconductor Technology Center. Officials with NY-CREATES, the state-affiliated entity that runs Albany Nanotech, are trying to land the center, which would bring in billions of dollars in government and industry research funding to the Capital Region and other parts of upstate.

“I have made it a top priority to work with President Biden to prioritize the absolute necessity of making a major investment in the nation’s semiconductor domestic manufacturing and (research and development), which can also fuel new high-paying jobs across upstate New York," Schumer said Thursday after Biden unveiled his infrastructure plan.

Schumer has been pitching four major upstate sites for new computer chip factories, including the Luther Forest Technology Campus in the town of Malta, where GlobalFoundries has its Fab 8 factory employing 3,000 people. New York state provided GlobalFoundries with about $1.4 billion in cash and tax breaks for Fab 8, which cost roughly $15 billion after several expansions.

A second fab, which would be called Fab 8.2, would likely receive a similar amount or more in federal and perhaps state funding if Schumer's plan comes to fruition.

The other sites are located outside of Utica and Syracuse, as well as at the STAMP site in Genesee County, where Samsung has reportedly shown interest.

GlobalFoundries CEO Tom Caulfield, a New Yorker and former IBMer, has been leading the charge for the revival of the U.S. chip manufacturing sector and has said he would likely consider building a second fab at Luther Forest should the Schumer plan, known as the CHIPS Act, get congressional funding.

GlobalFoundries is a major chip maker for the Defense Department, which does not own its own chip factories and must outsource its supply needed for weapons systems, jets, tanks and Navy vessels.

Intel's entry into the foundry market along with GlobalFoundries appears to show that the CHIPS Act may already be causing a seismic shift that could lead to a new wave of semiconductor sector interest in upstate New York and the Capital Region that could sustain it for decades.

Even GlobalFoundries is welcoming the move, despite now being in direct competition with Intel in the foundry sector.

"It is great to see another champion like GlobalFoundries entering the semiconductor foundry space," said Laurie Kelly, vice president of global communications for GlobalFoundries. "The Intel announcement validates the importance and value of semiconductor manufacturing, which will only increase in importance given the rapid acceleration of demand."

The two companies will likely be able to move freely among customers since Intel is focused on the bleeding edge of chip technology, while GlobalFoundries makes more mainstream chips that account for 70 percent of demand.

"Together, the combined offerings provide potentially a comprehensive domestic foundry solution, which when fueled by funding from federal and state governments will accelerate the availability of a secure local supply of a full range of semiconductors for both commercial and national security requirements," Kelly of GlobalFoundries added.

The Capital Region business community also supports the CHIPS Act funding, although many are wary of the business tax increase that Biden is proposing as part of his infrastructure plan, which calls for an increase in the corporate tax rate from 21 percent to 28 percent.

"We are thrilled that the Biden Administration is committed to funding for the CHIPS Act," Capital Region Chamber CEO Mark Eagan told the Times Union. "The semiconductor industry has transformed the Capital Region’s economy. (But) strategic investments like this shouldn’t be funded through tax increases. We are hopeful that with bipartisan support that Congress will pass the CHIPS Act without putting the cost on taxpayers."

Kelley, who now runs his own consulting company with clients across the country, says Intel's interest in Luther Forest and New York state was always about strengthening the U.S. chip sector, which has been pulled overseas for decades after having been mostly invented here.

Kelley said that while Intel might look at the STAMP site in western New York, the obvious choice would be Luther Forest since it would be so close to its research program in Albany with IBM. He said he thinks having Intel and GlobalFoundries right next to one another would be perfect.

"Intel wanted to come to New York very badly," Kelley said. "My whole purpose was to help this technology stay in the U.S."