Before the COVID-19 pandemic most consumers thought semiconductors (or microchips) were just another part of the increasingly complex infrastructure of new vehicles. Supply chain shortages however suddenly emphasized just how important these tiny microchips are to the manufacture of not just vehicles but a host of other items. The disruption in the semiconductor supply chain may well continue to the end of 2024.
Production of almost all semiconductors takes place in mega “foundries” owned by a handful of companies, with over 80% of global production offshore, mainly in China, Taiwan and South Korea. The global shortage and reliance on overseas production quickly had an impact on the American economy and lawmakers also saw the bigger picture how in a digital world, national security interests are also affected by the lack of these critical components.
In response, Congress passed the bipartisan CHIPS Act of 2022 to enhance U.S. semiconductor manufacturing, R&D, strengthen national security interests, and reinforce America’s chip supply chains. This is bold public policy, but it comes with an enormous price tag – over $52 billion USD. While China’s level of financial support remains opaque, we can safely assume they are investing huge public sums as well, while other countries such as India have announced foundry subsidies covering up to 90% of costs. Canada cannot outspend its way to the top of this competition.
What’s a country like Canada to do?
Despite lacking a major foundry, Canada does have some manufacturing capacity and a strong semiconductor ecosystem. The Government of Canada underlined the importance of the sector earlier this year, announcing a $150M Semiconductor Challenge Callout to existing players for initiatives in sensor and microelectromechanical systems (MEMS), compound semiconductors and advanced packaging. A $90M commitment to the NRC’s Canadian Photonics Fabrication Centre was also announced. These are positive first steps, but more is needed if we are to be a global player in the semiconductor space.
Canada’s next move: developing talent and growing the ecosystem
The expertise in these organizations is impressive and represents a potentially important ecosystem through which Canada could develop, over the next decade, an expanded, globally competitive semiconductor sector. Our greatest strength is our talent of highly qualified personnel (HQP) who train in our universities and work for companies and research organizations based here. All too often though, our HQP move elsewhere simply because there is not a big enough ecosystem of players to help them grow. Whether they are Canadian or international who come here for education, too many of our brightest graduates leave the country.
Where do we go from here?
A comprehensive Canadian semiconductor ecosystem is needed to develop our world-class talent. The Canadian space should be geared to specialty, high-growth technologies that are needed for next-generation applications like Artificial Intelligence, 5G telecommunications, the Internet of Things and quantum computing. The Canadian ecosystem would bring together established and emerging players to accelerate and create opportunities for semiconductor manufacturing, R&D, and talent development. It would also keep sensitive intellectual property in Canada to ensure sustainability and growth.
As happy as I would be to see a state-of-the-art multibillion dollar foundry in Canada, we can play to our strengths with strategic, forward-thinking, relatively modest investment.
A well-coordinated semiconductor ecosystem in Canada will help existing companies expand, new companies to be incubated, and thousands of Canadians be trained to work in high-paying jobs in a sector which will only continue to grow.
Gordon Harling is President and CEO of CMC Microsystems