Tech and chip manufacturing help make metro areas ‘dynamic’

The influx of federal funding for semiconductor manufacturing has helped remake several cities’ economies, even as the threat of those funds disappearing has given leaders some pause.

In Western New York, cities like Buffalo, Rochester and Syracuse are benefiting from millions of dollars in investment in underserved communities to help boost computer chip making, including through workforce development. Meanwhile, the Lehigh Valley in Pennsylvania has maintained its long heritage in semiconductor manufacturing, and Boise, Idaho has benefited from being a headquarters of Micron Technology.

Being a hub for technology can play a crucial role in economic development, according to a recent study from think tank Heartland Forward, which focuses its research on economic development in the 20 states that make up the center of the U.S.

The group found in a study of 380 metropolitan statistical areas that while Midland, Texas, is the most dynamic due to its “oil-driven economy,” technology and chip manufacturing can help cities vault up the rankings, especially as cities invest in research into emerging technologies like generative artificial intelligence. Heartland Forward defines a “dynamic” metropolitan area as one that generates economic growth, attracts new residents and is an attractive place to live.

The federal CHIPS and Science Act, which passed in 2022 and looks to boost the nation’s semiconductor industry, designated 31 communities as tech and innovation hubs in 2023 through the Economic Development Administration at the Department of Commerce.

“The CHIPS and Science Act is still in the early stages of having an impact,” said Ross DeVol, Heartland Forward’s CEO. “But you're starting to see, in my opinion, the early signs of — I don't know if we would call it reshoring. It could be reinvesting in the U.S. rather than someplace else. That's the hope and expectation in many of those areas.”

In its research, Heartland Forward found that Silicon Valley has reclaimed its position as one of the most dynamic metro areas, thanks in large part to the development of generative AI by large tech companies, as well as the legions of new startups in the area who are looking to also use the technology. The San Francisco metropolitan area is also trying to shape the future of generative AI with what Heartland Forward described as a “new wave of ‘young firms.’”

“The re-emergence of Silicon Valley and San Francisco showcases their ability to innovate and adapt, in this case by investing, researching and developing generative AI tools,” the report says.

Separately, many communities see promise in becoming semiconductor manufacturing hubs, especially given their use in electronic devices and as a way to address the national security implications of relying on imported chips from politically unstable countries. 

The Lehigh Valley has around 35 different companies involved in various parts of the chip manufacturing supply chain, and federal investment has been helpful in starting to wrestle back control of the global market from the likes of Taiwan and South Korea and attract companies, manufacturing and jobs to U.S. communities.

“It's the only real federal government intervention into stimulating a manufacturing sector of the economy with direct transfer of hard dollars to support and initiate growth of an industry like that,” said Don Cunningham, president and CEO of the Lehigh Valley Economic Development Corporation, which promotes the region’s economy. “It's unusual to see this in any sector, and I would say from our vantage point, it did what it was intended to do.”

DeVol said in the future, it is “really critical we see economic growth be less concentrated on the coast,” and communities are already positioning themselves for just that. Tom Kucharski, CEO of the Invest Buffalo Niagara economic development authority, said there is an opportunity for a new generation of leaders and companies to “put their stamp on the future.” Buffalo, for example, has an existing electrical grid from its industrial past that can be upgraded and modernized to help support the jobs of the future.

“With just the right investment, we can really improve big power, which is a huge demand in the country,” Kucharski said. “I think it's going to revolve around tech, but I think our tech is going to be different. Our tech is going to be involved in the life sciences and in manufacturing, of the infrastructure of the Internet of Things and AI. If we can find our way to that, I think we'll be prosperous.”

While it may be tempting for communities to have “all your eggs in one basket” and invest only in chip manufacturing, Cunningham said it has been crucial for the Lehigh Valley to have a “healthy balance” of other companies and sectors. While 16% of the area’s economy is manufacturing — higher than the national average of 12% — the Lehigh Valley also has food and beverage production and medical device manufacturing. Communities must learn from the past, he said.

“There was a time here where we were so heavily weighted to steel production and so forth as a large anchor industry,” he said. “When those industries go away, or the economy takes a turn, or the global market shifts to another country, it sets a market back on its heels because that disappears. I think the strength of our economy now, and the strength of our manufacturing economy, is we have a little bit in each of these buckets.”