The Smartest Places on Earth

by Antoine van Agtmael

  It’s important to understand, however, that a brainbelt connector takes the role of a “social” connector one step further. The social connector is typically part of several different social groups and helps to bring diverse people into contact with each other. Usually those people are already interested in making connections beyond their current circles. Connectors in brainbelts, by contrast, do not merely have the interest and communications skills to make introductions and then go on their way. They also have the vision to persuade others to embrace something that is beyond their radar screen and embrace that vision as their own. They motivate people to connect, work to find common ground and establish new relationships outside of their comfort zone, and then build these relationships into lasting communities. Beyond that, they may have hard going at first because the people and groups they want to connect are not interested in doing so, or are even hostile to the connector’s efforts.

  How did Kaloyeros take on this essential and difficult role? In 1988, he was recruited by Governor Mario Cuomo of New York to come to Albany to head up the CNSE. Cuomo and a small circle of like-minded policy makers in New York state had become convinced they needed to find a long-term solution to problems stemming from New York’s declining rustbelt industries. With support from IBM and participation of the State University of New York, they focused on chip making. But they needed a strong leader and articulate spokesperson to push forward the effort, someone with academic chops and entrepreneurial drive. An exhaustive search led to Kaloyeros.

  When we first saw SUNY Poly’s NanoTech Complex on that visit to Albany in 2013, we both had the same thought: this is the kind of advanced research campus one might expect to find in Asia—at the Hsinchu Technology Park outside Taipei, for example—not on the outskirts of one of America’s supposedly struggling cities, Albany. What we found at the NanoTech Complex was a modernistic concatenation of glass-and metal-skinned structures, housing offices and labs, connected by glass walkways.

  Then we met Kaloyeros, and we were similarly impressed by his engaging manner and quick mind. One moment he might be talking cars—he drives a Ferrari F458 Spider, a $250,000 car that can hit 60 miles per hour in barely three seconds—and the next he would speed-shift into a discussion of the intricacies of the next generation of semiconductors. We saw that he was a compelling booster for the Albany brainbelt, with a simple pitch: it’s time to challenge Asia as chip-maker-to-the-world. We could also understand he had the academic and business credentials to convince the world’s top semiconductor firms to bring their cutting-edge research initiatives to Albany.

  The clean room at SUNY Poly College of Nanoscale Science and Engineering’s NanoTech Complex.

  Credit: Peter van Agtmael/Magnum

  What we didn’t get right away was why a world-class physicist with countless opportunities would choose Albany. Yes, there was the matter of compensation, but it was more than a rich offer that attracted Kaloyeros. As he explained to us, he could have found a rewarding position in any number of industrial monoliths or academic institutions. But in Albany he saw a unique opportunity to do something much more challenging and meaningful. He could engage in the most exciting industry of the day, build a critical mass of science and engineering expertise, and awaken a sleeping beauty that might one day rival the current meccas of chip making and would alter the competitive landscape that had been dominated by Asian chip makers for so long.

  Kaloyeros knew the process would not be as simple as bringing a few people together for a meeting or two. He would have to overcome deep industry skepticism about the feasibility of pulling together the various players into a focused effort and work with them to collaborate in a process of open innovation that would sustain itself for years.

  Fortunately, both the governor of New York and IBM, which had its headquarters nearby, knew the region was in a precarious situation and needed to confront reality. The state government, the state university system, and the companies in the area felt very keenly the threat of competition from abroad and from other regions in the United States. The university leadership at SUNY Albany was eager to keep pace with the state of the art in advanced manufacturing technology but had learned the hard way that it could not compete with top research universities like MIT by chasing one government or industry grant after another. At the same time, IBM, then a leading in-house semiconductor manufacturer with facilities in East Fishkill, New York, was coming to the realization that its innovation process, which it called the “Kremlin model”—closed, autocratic, siloed—was obsolete and would not deliver the kind of breakthrough innovations the company needed to stay in the forefront. No single company, even one that was massive and replete with talent, could make the multibillion-dollar investments required to keep a step ahead of the entire industry.

  Kaloyeros saw, therefore, that the players all needed something they didn’t have but could gain through the sharing of brainpower. SUNY’s Center for Global Advanced Manufacturing, for example, relied heavily on industry for funding of its research facilities, and the companies depended on the academics for basic research, but the relationships were project based, were not well focused on a collective goal, and were not particularly open, in that knowledge gained was not necessarily shared beyond the project participants.

  What was needed, Kaloyeros decided, was a new brainsharing environment, and the best way to establish that was with a facility that would serve as an incubator, an innovation hub. That was the impetus behind the creation of what he calls the “800-pound gorilla,” SUNY Poly’s NanoTech Complex, which had so impressed us.

  There, industry researchers could work side by side with members of the SUNY faculty and their graduate students. Kaloyeros believes that by owning and operating the research facility, industrial companies are encouraged to keep innovating. And as long as they keep doing so, the university will benefit from the collaboration, through contracts, increased attractiveness to talent, and the creation of start-ups and spin-offs, as well as the securing of patents and the like. “In the end,” Kaloyeros told us, “we believe that those who build the infrastructure will get the fruits of advances in technology.”1

  Kaloyeros knew he would have to do more than convince enough of the existing players to locate to the center. He would also have to attract new ones. He became the driving force in creating the Global 450 Consortium (G450C), persuading industry leaders from all over the world—Intel and IBM, Nikon in Japan, Samsung in South Korea, TSMC in Taiwan, and GlobalFoundries (GF), among others—to locate their next-generation research activities in the Albany area. The research activities on the 450-millimeter wafer are carried out at the NanoTech Complex, but GlobalFoundries manufactures semiconductors in Malta. Samsung and TSMS conduct research and have manufacturing facilities outside Seoul and Taipei. During a follow-up visit to Albany in August 2015, we were given an opportunity to enter the cleanroom and see a dozen engineers hard at work testing the world’s first 450-millimeter machine in operation. Achieving this took more than a decade, amazing perseverance, creative thinking, and solid arguments.2

  Kaloyeros made a strong case to these proud competitors for setting up the G450 consortium. His first argument for collaborating in an unprecedented manner was that it would increase effectiveness. The brainsharing process is much more effective than the traditional fragmented and unfocused process the companies and universities had been following, with its projects and initiatives a poorly integrated patchwork of efforts.

  Second, he stressed the important structural advantages to the approach of sharing brainpower. Only under the mantle of a university effort can companies that are competitors within an industry pool their resources and share information without having to worry about antitrust scrutiny from the federal government. As part of a collaborative effort, they can jointly spend billions of dollars on state-of-the-art equipment and processes that are too expensive for individual companies to purchase and not be in danger of accusations of collusion or price fixing. By doing so
, they create an open platform whose research benefits everyone, with the individual participants still able to apply the research to create their own proprietary products.

  Third, Kaloyeros promised that the participants in the Global 450 Consortium would be able to take on far bigger challenges with far greater chances of success and the possibility of dazzling rewards. Today, at SUNY Poly’s NanoTech Complex, 3,500 industry scientists and engineers, together with faculty and graduate students, are working day and night in a $30–$40 billion effort to solve the problems associated with the creation of the next-generation 450-millimeter silicon wafers, including the use of EUVL technology. Nikon of Japan, ASML of Holland, and lens maker Zeiss and laser expert Trumpf, both headquartered in Germany, are all key players in the work.3

  SUNY Polytechnic also serves as an incubator of local start-ups and spin-offs cooperating with the group Eastern New York Angels (ENYA), which has already invested between $50,000 and $250,000 in each of nine start-ups with the $3.9 million it has raised in two rounds of financing. One example is Bess Technologies, a start-up that is developing more efficient lithium-ion batteries for electric cars and consumer electronics with higher storage capacity and faster charging.4

  Kaloyeros believes that these efforts have made the semiconductor industry into a model for other American industries that want to be at the cutting edge of complex technology innovation. “People used to say that all roads to Albany go through IBM,” he said, “but they now say that all roads to IBM go through Albany.” And he does not mean Albany, the seat of state government, but rather Albany, home of SUNY Poly’s NanoTech Complex.

  Despite all of his accomplishments, Kaloyeros had to resign in October 2016 as president and CEO because of legal issues and his management style. No longer in its infancy, SUNY Poly would continue under new leadership, but the sudden disappearance of the early connector would obviously take some of the air out of the balloon of the ambitious plans for Albany as well as Utica and Syracuse in upstate New York that had propelled forward based on his drive and vision.

  The Environment as Talent Magnet: The Expansion to a Regional Center

  The Albany brainbelt extends beyond the city itself: the success of the NanoTech Complex is just one example of collaborative innovation taking place among the state, academia, and corporations in what has become known as the Hudson Tech Valley.

  Shirley Ann Jackson, president of Rensselaer Polytechnic Institute, a major academic research center twenty minutes’ drive from Albany, agrees that the NanoTech Complex has successfully promoted nanotechnology, brought back semiconductor companies, and created jobs throughout the area. Just as important, she says, the work of the experts at the center has catalyzed a whole new wave of research that will move the industry beyond silicon-based semiconductors. The researchers at Rensselaer, she said, “are trying to think beyond 2020” by finding ways to marry nanotechnology with biotechnology to overcome the limitations of silicon production altogether.5

  The influence of SUNY Poly’s NanoTech Complex extends beyond research into manufacturing, as well. We drove 20 miles north of the academic research labs of Rensselaer on Interstate 87 to the town of Malta, where GlobalFoundries, the world’s second-largest independent semiconductor foundry,6 has committed $10 billion to the creation of an advanced manufacturing facility, known in the industry as a “fab.” Mike Russo, director of government relations for GlobalFoundries, told us the plant was the biggest greenfield construction project begun in the United States after the Great Recession and will be one of the most modern and automated plants in the world. The first stage of the facility became operational in 2012, and as of 2015, about 3,200 employees were working there. The facility runs 24/7, and technicians, wearing white coveralls and blue glasses, constantly monitor the equipment. Over half the employees are chemical, electrical, and mechanical engineers, who hail from all over the world. The annual payroll is $350 million, with a salary average of about $90,000.

  By establishing its new Malta facility, GlobalFoundries—which operates older, less-advanced plants in Singapore and Dresden, Germany, and took over IBM’s semiconductor manufacturing plants and intellectual property in October 2014—is now technologically7 in the same league as the biggest manufacturers in the semiconductor industry, such as TSMC and Samsung, even though GlobalFoundries is smaller in size.

  The second stage of the fab was under construction during our visit in August 2014, with 5,000 construction workers laboring on any given day. The entire site can accommodate as many as four fabs, but the timing of construction of stages three and four will depend on how fast the market grows and how well the Malta infrastructure and environment can support additional expansion—through tax incentives and the availability of a plentiful supply of energy.

  Not only will GlobalFoundries have a major presence in the brainbelt, many of the company’s major suppliers have moved in, too, including Applied Materials, Tokyo Electron, and ASML. Mike Russo is convinced that eventually a whole new supply chain will form here as production increases. Another manufacturer, the German-Austrian M+W Group, has built $1.4 billion worth of high-tech plants in New York state and has moved its US headquarters from Austin, Texas, to the Hudson Tech Valley.

  So, jumpstarted by the collaboration between the state of New York, its university system, and IBM, the Hudson Tech Valley has become a thriving brainbelt. And, as is characteristic of all brainbelts, many kinds of businesses in the region are benefiting, not just those involved in technology innovation. When we ate dinner at a restaurant in nearby Saratoga Springs, our waiter commented that the influx of jobs from the investment GlobalFoundries has made in the fab has sparked a revival of the city’s downtown area. Employees from China, Europe, and India have brought new life to the streets and shops of this picturesque town, which has long been famous for its racetrack and summer arts festivals but now is known as the home of one of the most advanced manufacturing facilities in the world.

  Watervliet Arsenal machine rebuild shop, 1845.

  Credit: Library of Congress, Prints & Photographs Division, HAER, Reproduction number: HAER NY,1-WAVL,1/14--10

  Just across the Hudson River from Rensselaer is the historic town of Watervliet, New York, where brainbelt town start-ups are thriving. Watervliet is a quintessential rustbelt town. In the nineteenth century, it housed a federal arsenal that turned out cannons and ammunition for use in the War of 1812 and the Civil War, and it continues to produce armaments for the military. Watervliet is still the home of Bennett Laboratories, a major research center for the US Army.

  Today, Watervliet has become the preferred venue for new companies that are springing up around the semiconductor initiative and have ties to SUNY Poly’s NanoTech Complex. With the presence of twenty smaller high-tech companies—including Cleveland Polymer Technologies, Solid Sealing Technology, and Vistek Lithography—the Watervliet area is becoming a high-technology manufacturing zone.

  Our visit to the Albany region was an eye-opener. We had begun to get a sense of the brainbelt. We had felt the intensity and witnessed the skills of the connector who had begun it all. We understood that, at least in this case, a physical facility was necessary to anchor the effort. We learned how a single initiative like the “800-pound gorilla” facility can then become a magnet to attract others and a catalyst for research and development that broadens the original focus of the activity. And we saw how a brainbelt like Albany can become a model for other areas and other industries. Clearly, Jeffrey Immelt knew what he was doing when he selected an obscure town in Mississippi for GE’s futuristic aircraft engine plant. A brand-new form of manufacturing, we saw, is making its entry into the United States, in unlikely places and exciting ways.

  Dresden: Leveraging a Legacy

  Would the same be true in Europe? We had already visited Eindhoven, but we needed more evidence to determine whether rustbelts were transforming into brainbelts in a wide variety of communities. As we arrived in Dresden by plane, we found it hard
to imagine that this picturesque capital city of the state of Saxony, in eastern Germany, had been a leading scientific, industrial hub in the 1930s, known for its excellence and innovation in automotive, aircraft, and lens manufacturing.

  It had also been an important cultural center for centuries. Indeed, Johann Sebastian Bach’s great desire was to be in residence at the Dresden Court rather than in the dreary nearby city of Leipzig. It was equally amazing to ponder how Dresden is once again becoming an industrial powerhouse, a brainbelt every bit as significant in the world of chips and sensors as the Hudson Tech Valley region. Like Albany and Eindhoven, its turnaround benefited from a politician’s having to deal with a crumbling manufacturing sector and a new eagerness of academia and businesses with something to prove.

  Today, Dresden, and its Saxony surrounds, has become a high-tech center. GlobalFoundries,8 the manufacturing leader we first met in Albany, has a significant part of its chip production located in Dresden, as does Infineon.9 And, around these two companies, a collaborative ecosystem has sprung up, composed of more than 2,000 high-tech companies employing 51,000 people.

  How did this happen? This is the question we posed to Bettina Vossberg, who manages the High Tech Startbahn,10 an incubator at the Technical University of Dresden, the largest university of its kind in Germany. She provided a bit of instructive history. The state of Saxony in East Germany—which is home to such cities as Leipzig, Dresden, and Jena—had been the country’s premier industrial and research center before World War II. When the area came under Communist rule after World War II, most of the entrepreneurs left the region and settled in the states of Bavaria and Baden-Württemberg, in West Germany. The departure of so much talent led to an industrial decline in Saxony and a concomitant Wirtschaftswunder (economic miracle) in the west.