Congress passed a plan to build Silicon Valleys across the country, now they just need to fund it. Though the Regional Technology and Innovation Hubs (Tech Hubs) Program is authorized and underway, it is working with just six percent of its authorized funding. Without a significant increase in funding, the Tech Hubs Program will not be able to deliver on its promise to enhance U.S. leadership in advanced tech and drive greater innovation beyond traditional funding hubs.
Silicon Valley, the original tech hub, did not spring up overnight. As the name implies, the region got its start from semiconductor (chip) manufacturing. In the 1950s Stanford University received Department of Defense (DOD) funding for microelectronics research, which attracted companies like General Electric to set up the area and led to the founding of Fairchild Semiconductor in 1957. With DOD and NASA as initial customers, Fairchild grew into a highly successful company that drove a powerful flywheel effect: the region’s research attracted talent, that talent grew their commercial knowledge at Fairchild, left the company to create their own startups and the venture capital followed. This cycle repeated for decades, creating a legacy of innovation long after the domestic chips industry dwindled. As of today, former Fairchild employees are responsible for 70% of the region’s publicly traded companies.
The Tech Hubs Program aims to recreate this flywheel effect across the U.S., while driving further innovation in semiconductors, AI, quantum and other deep tech sectors. The infrastructure of Silicon Valley directly fostered the success of Fairchild Semiconductors and the continued success of the many startups it inspired. The Tech Hubs program was designed to use this infrastructure model in the hopes of creating new Silicon Valleys across the country.
While domestic chip manufacturing has declined, reliance on chips has increased dramatically since Fairchild’s founding. Chips are ubiquitous, they power everything from smartphones to cars to your smart refrigerator. Our growing dependence on them, and the vulnerability of the semiconductor supply chain became painfully apparent during the COVID-19 pandemic, causing manufacturing delays across industries that took years to recover from. In response, Congress passed and President Joe Biden signed the CHIPS and Science Act (2022), authorizing $53 billion to onshore semiconductor manufacturing and increase global competitiveness by creating centers of world-leading technology innovation across the country via the Tech Hubs Program.
How Do Tech Hubs Work
Congress authorized $10 billion for the Tech Hubs Program to be administered by the US Economic Development Administration (EDA). The program consists of a two-phase competition. First applicants form a regional consortium that must include at least one industry partner, higher education institution, and local government or economic development organization. This design emphasizes collaboration amongst the key pillars of innovation similar to those that helped create Silicon Valley. Many of the Tech Hub applicants go further including labor coalitions, community non-profits, and small businesses. The NY SMART I-Corridor consortium, for instance, brings together over 100 different partner organizations across upstate New York, in their aim to create a semiconductor hub.
Once created, consortia apply for Phase I by proposing projects in at least one of the critical technology areas defined by the CHIPS and Science Act; these included AI, semiconductors, quantum, etc. The project outlines must demonstrate how the region will advance innovation in one of these areas by capitalizing and developing the region’s strengths. In the case of the NY SMART I-Corridor, the proposal outlined several projects aimed at making upstate New York a semiconductor innovation and manufacturing hub. A key part of their proposal is forming the Commercialization & Collaboration Center (C3), a full service innovation studio that connects innovators with R&D resources, manufacturing assets and university research to drive commercialization.
After applicants become Tech Hub designees, they are eligible to apply for Phase II, with highly detailed proposals of component projects and the funding they would need to execute. They must include not only how these projects will advance their region’s innovation infrastructure, but how these projects will self-sustain even after federal funding. NY SMART’s Phase II proposal included the creation of accelerators, workforce pipelines, expanded R&D infrastructure and creating a supply chain activation network to include regional manufacturers in the semiconductor ecosystem. Together these projects would build the region into a coordinated semiconductor hub and create the perfect conditions to accelerate innovation.
Where Are We Now
In 2023, the first 31 Tech Hub regions were designated. A third of organizations in these consortia were private sector businesses, which fulfills the Tech Hub Program’s stated aim to help grow and scale private sector capabilities in these communities. By July 2024, 12 of the 31 were awarded implementation grants totalling $504 million. Weeks before leaving office, the Biden Administration authorized another round of grants for 6 more Tech Hubs, totaling $210 million. As part of their Phase II application, hubs submitted a combined 2,000+ investment commitments from private investors, indicating that these projects had gained buy-in from the private sector before the Tech Hubs even received federal funding.
Among the recipients of Phase II grants are the NY SMART I-Corridor’s semiconductor proposal and Elevate Quantum, a regional consortium spanning Colorado and New Mexico which both received about $40 million respectively. The Elevate Quantum consortium consists of 120 members including national labs, universities and capital investors. The group’s aim is to use their funding to create a nationally leading quantum hub by building a shared R&D infrastructure, a startup accelerator, and public-private partnerships for commercializing quantum research applications.
While these grants are meaningful, they fall well short of the program’s ambition. Congress authorized $10 billion over 5 years for Tech Hubs, but less than $600 million or six percent of those funds have been appropriated. And the outlook on funding doesn’t seem to be improving. The final 6 Phase II winners announced at the end of Biden’s term, have had their grants recalled by the Trump administration. This was followed by an announcement from the EDA that Tech Hubs could apply or reapply for Phase II funding. As of September 19th, a new round for implementation grants is underway, but it’s a redivision of the recalled funding, not a release of additional funds.
These delays and funding recalls hurt already-participating Tech Hubs, which only received a fraction of the promised funding, as well as Tech Hubs waiting to see if they advance to the funding stage. The Tech Hub regions have expended time, resources, and political capital in their community to knit together consortia and produce detailed project proposals. Failing to provide the funding not only hamstrings the potential of their projects, it also risks losing the trust and enthusiasm of the very regions it set out to transform.
Why This Matters for Startups
Failing to fully fund Tech Hubs is a loss for innovators, economic development, and U.S. global competitiveness. For startups especially, the accelerators, talent pipelines and R&D projects being undertaken by these Tech Hubs is transformative. These are the pillars founders and early stage employees need to grow.
Successful hubs like NY SMART and Elevate Quantum are demonstrating that this can work. They are building ecosystems where early stage companies can find talent, share resources and commercialize. In essence, these hubs are following in the footsteps of the Stanford labs and Fairchild Semiconductor, to create a pipeline for startups like the one that built Silicon Valley into what it is today.
Without full investment, only a handful of regions will benefit and even those that receive funding will only get a jump-start. If the U.S. wants to remain globally competitive and remain a leader in advanced technology, Congress needs to fully empower the Tech Hubs Program.
Engine is a non-profit technology policy, research, and advocacy organization that bridges the gap between policymakers and startups. Engine works with government and a community of thousands of high-technology, growth-oriented startups across the nation to support the development of technology entrepreneurship through economic research, policy analysis, and advocacy on local and national issues.
