The Economist - UK (2022-02-19)

40 United States The Economist February 19th 2022

ityleader,promisedtobringthebilltothe

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Industrialpolicy

Hard-tech heartland

T

heentranceofMHub,a tech“incuba­

tor” in Chicago, resembles similar out­

fits  elsewhere.  There  is  a  bar  made  from

disused silicon chips, complete with a vin­

tage  arcade  games  machine,  a  foosball  ta­

ble  and  a  pool  table.  Much  like  other  tech

incubators,  there  is  also  nobody  around

taking  advantage  of  them,  as  covid­19  has

reduced the appeal of socialising with lots

of colleagues. To find out what is different

about MHub, you have to go farther inside.

At the back there is a fully equipped work­

shop. Three cncmilling machines, which

cut  aluminium  into  computer­designed

shapes,  hum  away.  There  are  devices

which  inject  plastic  into  moulds;  ones

which print silicon chips; 3dprinters; and

a  ctmachine  to  scan  prototypes.  Unlike

the toys in the games room, they are in use.

Engineers scurry around clutching parts.

MHub,  founded  in  2017  in  a  building

that once housed a Motorola design lab, is

the  world’s  first  “hard  tech”  incubator,  at

least according to its ceo, Haven Allen. The

business  model  works  much  like  tech  in­

cubators elsewhere. Startups are invited to

apply  to  join  through  a  competition.  The

winners are given mentoring, two years of

access  to  the  space  and  $75,000  in  cash.

MHub  takes  a  chunk  of  equity,  hoping  to

get  its  money  back  when  the  firms  suc­

ceed.  Unlike  incubators  elsewhere,  how­

ever, which are devoted to finding brilliant

app  designers,  at  MHub  only  people  with

physical products to sell are considered. It

is in Chicago so that successful applicants

can  “leverage”  access  to  manufacturers

across the Midwest, says Mr Allen. 

MHub  taps  into  the  dreams  of  a  lot  of

government types and business folk across

the  region  that  they  might  yet  turn  the

rustbelt  into  something  more  glamor­

ous—a “Silicon Heartland”. The idea is that

the Midwest has a huge amount of manu­

facturing  expertise  in  an  era  when  tech

firms increasingly need it. 

“We know how to  make  things  and

make  things  happen  in  Michigan,”  says

Garlin  Gilchrist,  the  lieutenant­governor

of  Michigan,  a  former  software  engineer

who returned from the West Coast. “We’re

just  beginning  to  write  our  future,”  says

Penny Pritzker, a Chicago­based billionaire

who was commerce secretary under Barack

Obama. But for much of the past 60 years,

the Great Lakes economic region (which al­

so includes Indiana, Ohio and Wisconsin)

has  struggled.  The  manufacturing  indus­

try, which still makes up 15­20% of gdpin

most of those states, has grown more slow­

ly than services. 

Can  “hard  tech”  really  reverse  that?

There are some reasons to be hopeful. Last

month  Intel,  a  chipmaking  giant,  an­

nounced  plans  to  invest  $20bn  in  a  new

factory  near  Columbus,  Ohio,  which  the

firm said could become “the largest silicon

manufacturing  location  on  the  planet”.

General Motors has announced that it is in­

vesting $7bn in Michigan in high­tech car

manufacturing,  including  a  battery  plant

near Lansing. In Chicago, funding for start­

ups  more  than  doubled  in  2021,  to  about

$7bn for the year. 

According  to  Mark  Muro  of  the  Brook­

ings  Institution,  a  think­tank,  a  highly

competitive  manufacturing  base  could

promote future growth for the region. “If it

survived 25 years or more of hyper­globali­

sation and offshoring, what is left is pretty

strong,”  he  says.  That  sort  of  high­tech

manufacturing—particularly  of  cars,  but

also  of  medical  equipment  and  drugs—

tends to require both engineering and soft­

ware­development  talent.  As  it  happens,

the region’s universities already provide a

ready supply of both. But in the past “a lot

of that talent has wound up in Silicon Val­

ley,” Mr Muro says.

One of the reasons why growth has been

so  sustained  in  big,  densely  populated

places like New York and the San Francisco

Bay  Area  is  that  tech  firms  like  to  be  near

other tech firms, so as to be able to poach

talent.  The  “agglomeration”  benefits  are

such  that  they  are  willing  to  pay  even  the

outsize  salaries  workers  in  such  regions

can demand. That in turn has sucked away

workers and capital from the interior. But

if  tech  firms  are  starting  to  make  more

physical stuff, they need to be closer to fac­

tories—which  the  coasts  have  relatively

few  of,  and  the  Midwest  has  aplenty.  The

competition to become the world’s leading

internet  software­developing  region  is

“over, it’s happened”, says Chris Gladwin, a

serial tech entrepreneur based in Chicago.

But a new, wider boom may be starting.

Making  sure  it  actually  comes  to  the

Midwest may take more than states are ca­

pable of doing on their own. To attract In­

tel,  Ohio  offered  around  $2.1bn  in  incen­

tives, including grants and tax breaks. gm’s

investment in Michigan came with around

$800m.  But  cash  alone  cannot  create  the

conditions for sustained growth, says Brad

Henderson  of  p33,  a  Chicago  organisation

which connects firms to universities. Sub­

sidies  may  merely  move  around  invest­

ment that would have happened anyway. 

Instead,  sparking  a  boom  will  require

deep co­operation and federal investment.

A  package  of  $250bn  aimed  at  improving

America’s  competitiveness  with  China  by

investing  in  high­tech  manufacturing  is

working  its  way  through  Congress.  To  re­

verse decades of relative decline is a tall or­

der. But Americans are buying more stuff,

and supply­chain jams have caused short­

ages  of  everything  from  silicon  chips  to

lumber.  If  the  Midwest  is  to  catchup,its

boosters believe it needs to take itschances

now,beforetheybegintofadeagain.n

CHICAGO

Midwestern states aim to become tech hubs by playing to their strengths

Start-up factory

CorrectionLast week, in “Another exodus”, we

wrote that Congregation Shearith Israel sued

Congregation Jeshuat Israel (cji) first. In fact, it was

the reverse. And cji wanted to be the Touro

Synagogue’s trustee, not the owner. Sorry.