February 23, 2013
Low region GDP belies a hot trend
By: Larry Rulison
Source: Times Union
ALBANY — The upstate economy isn't growing much these days.
released Friday by the federal Bureau of Economic Analysis found that
only Buffalo's economy is growing faster than the rest of the state's,
and two upstate cities — Syracuse and Binghamton — have watched their
economies shrink, a dire scenario for business and political leaders.
despite similarly sluggish growth in the Capital Region economy, there
is an exciting trend beneath the surface: the small but growing
high-tech industry, driven by the University at Albany College of
Nanoscale Science and Engineering and by GlobalFoundries, is expanding
at a furious pace.
The health of an economy can be looked at in
many ways. But one of the most important figures to economists is gross
domestic product, or GDP, which measures the amount of goods and
services produced in a geographic area.
In 2011, the most recent
year in the federal data, the "real," or inflation-adjusted, GDP in the
United States grew 1.5 percent, with metro areas having slightly better
growth at 1.6 percent.
Numbers such as that are not expected
to get the economy back on track. The number was lower for New York
state, which had only a 1.1 percent increase in GDP, despite efforts by
the Cuomo administration to control spending and taxes and encourage
In the Capital Region, GDP grew less than one
percent. Buffalo, by way of contrast, had 1.4 percent GDP growth.
Syracuse suffered the worst contraction of any major upstate city as its
economy shrank by 1.2 percent.
But local business and political
leaders can take solace that years of focusing their economic
development efforts on the high-tech industry, especially the
semiconductor industry that produces computer chips, appears to be
In fact, according to the government, computer and
electronic product manufacturing — which includes computer chips, is the
fastest growing sector in the local economy. In 2010, the latest year
for which data are available, the GDP of the local computer and
electronics manufacturing sector grew to $297 million from $134 million
the year before — an increase of 121 percent.
Kajal Lahiri, an
economics professor at the University at Albany, says the local
semiconductor industry is behind the increase. He said that,
statistically, the sector is still a small percentage of the whole
economy, and it is easier to grow an industry when it is smaller.
"But the potential is great, and its psychological effect on the overall economic multiplier can be very large," Lahiri said.
semiconductor industry has one of the highest GDP growth rates in the
world when things are going well, and many cities across the country
have seen their GDPs grow significantly because of local computer chip
operations, says Sergis Mushell, an San Jose-based analyst for
technology research firm Gartner. Examples include San Diego, home to
Qualcomm, which designs chips for smart phones, and Portland, Ore., home
to several Intel chip factories.
"They are a big contributor to the economy in those areas," said Mushell.
Kaloyeros, CEO of the NanoCollege, says the GDP data released Friday
don't include all the research and development spending by companies
such as Intel and IBM at the school.
Kaloyeros estimates that
R&D spending in the sector probably represents three to four times
the manufacturing output. But over time, as the local semiconductor
industry matures, manufacturing will overtake spending on research,
which chip companies typically set at about 20 percent of revenues.
Rooney, a senior vice president with the Center for Economic Growth,
which works to attract companies to the region, says the 2010 GDP data
haven't captured the true growth of the chip sector because the
GlobalFoundries factory in Malta didn't start manufacturing until early
2012. And the NanoCollege is still embarking on more expansion.
industry's impact on the region should only accelerate in the coming
years as integrated circuits continue to proliferate in familiar
products and in those we can't yet imagine," Rooney said.