Friday, September 30, 2011

Global 450 Consortium's Albany R&D: Boon or Boondoggle?

The announcement Tuesday that the Global 450 Consortium (consisting of IBM, Intel, Samsung, GlobalFoundries and TSMC) will invest $4.4 billion in a R&D center in Albany has generated some excitement and considerable skepticism.   For the latter, take a look at the recent Mannerism's post (link here).  Beyond the vagueness of the promised R&D goals that Manners points out in his post, there are additional questions of the funding.  According to the companies and the New York state government, there are no state subsidies involved.  That should reassure those who fear that the project is simply a boondoggle by companies to extract subsidies out of governments' concerned about competitiveness.  However, the details of the plan have not been released and, as always, the devil is in the details.  One crucial area is tax breaks.  The state may not be giving these firms money, but IBM, which is reportedly spending 3.5 of the 4.4 billion, as a prominent New York corporate tax payer may benefit heavily from tax breaks.  Large tax breaks for a New York-based firm to do R&D where it has always done lots of R&D has the stench of a boondgoggle.  However, what makes economic and industrial policy so difficult is that it is hard to suss out from the beginning what benefits this large scale R&D project will have for upstate New York and the wider US semiconductor industry (the latter of course not being a concern of NY state pols).  We'll really only know if this project has proven to be a boon to the local economy and American industry many years into the operations.  Nevertheless, with firms like IBM no longer shy about moving highly skilled jobs to other locations around the world, one does not have to be a cockeyed optimist to think these operations may turn out to be slightly more of a boon than a bane, but only time and details of the tax deals will tell us which one it is.