I find it amusing to look at Pathé news reel clips on YouTube covering insights into the future – from homes to fashion, work life to transportation – and invariably all wrong. The further one looks ahead, the more off-the-mark one is likely to be. I will be looking at the direction of the semiconductor sector and the role Canada has to play in it. To ensure we do not drift into the fanciful, we will look no further than the end of this decade – 2030.
Before we look forward, we will briefly take a look back. In 2009, after more than 100 years of hardware technology leadership, Nortel Networks finally shuttered. In 2016, BlackBerry stopped manufacturing its own handsets. These two events were major setbacks to hardware development in Canada and their fallout still reverberates today – including the exodus of hundreds of skilled professionals south of the border.
We should look at the fallout simply – in terms of return on investment to the Canadian taxpayer for raising a child. We have trained them all the way to post-secondary graduation, only to lose them in their most productive years. We must regard this as unacceptable.
The State of the Global Semiconductor Sector
Let’s take a look at the importance of the semiconductor sector globally. A 2021 study by the Semiconductor Industry Association of America found that for every semiconductor professional, 5.7 jobs are created in the broader economy. The semiconductor sector drives over $7 trillion in global economic activity and the number of semiconductors in production is expected to triple by the end of this decade. Semiconductors now underpin every industry imaginable – medicine, aerospace, communications, construction, entertainment, wearables, and so many others. Cars are now being referred to as “iPhones on Wheels.” This is no short-term trend and through to the end of the decade and beyond, semiconductors will be playing an ever more important role.
“For every semiconductor professional, 5.7 jobs are created in the broader economy.”
In the past few weeks, the Semiconductor Industry Association, in partnership with Oxford Economics, released the “Chipping In: The U.S. Semiconductor Industry Workforce” report. The report found that based on the immediate and projected requirements for this sector, the US will face a shortfall of 67,000 semiconductor professionals.
Despite the loss of major hardware companies, we still have core semiconductor companies doing research and development in Canada – AMD, Semtech, Intel, Qualcomm, Marvell, and others. But until recently, Canada has been an afterthought for companies considering where to set up design centres.
We are now at a rare inflection point in the semiconductor sector, and this is presenting Canada with an opportunity that we cannot afford to squander. And as with most opportunities, we have to act immediately and comprehensively.
Canada’s Semiconductor Opportunity
Firstly, what has brought about this inflection point? It’s not just a single factor but several. The recent pandemic caused disruptions in the microelectronics supply chain that caused severe shortages, long lead times to deliver, and unusually for electronics – sharp increases in retail prices. This affected major industries in Canada, none more so than the automotive industry, where production lines came to a standstill.
“The recent pandemic caused disruptions in the microelectronics supply chain that caused severe shortages, long lead times to deliver, and unusually for electronics – sharp increases in retail prices.”
The sharp increase in IoT (Internet of Things), IIOT (Industrial IoT), and AIIOT (AI-enabled IoT) requires more low-power purpose-built silicon. The number of smart plugs, thermostats, robot floor cleaners, lights, security, and other “intelligent” devices that seem to feel lonely and need to communicate with us are at unprecedented levels and require similar silicon solutions.
As our semiconductor demands have grown, and will continue to grow, Canada’s supply chain of semiconductor production has just not diversified across the globe as you might expect. To date, 60% of the world’s semiconductors are fabricated in Taiwan, which includes over 90% of the world’s most advanced semiconductors. Taiwan sits on the Pacific Ring of Fire and is frequently beset with tremors and earthquakes. Fortunately, Taiwan is as prepared for these eventualities as any country could be. However, any significant reduction of semiconductor output from Taiwan today would hobble every industry globally. There is not a single industry that would be unscathed.
“To date, 60% of the world’s semiconductors are fabricated in Taiwan, which includes over 90% of the world’s most advanced semiconductors.”
It’s important to note that the US Government has recently passed a USD $280 billion Chips and Science Act, the EU is passing their own version, and Spain, whose GDP is ranked two places behind Canada at 14th place, is investing €12.5 billion into its microchip industry. We must also recognize India, where they are investing heavily in their nascent semiconductor industry.
To date, Canada has not matched these numbers. Unfortunately, data on the Canadian semiconductor sector is less readily available, despite efforts from the Canadian Semiconductor Council, which published an invaluable report and action plan that laid out short-, medium-, and long-term recommendations to build Canada’s semiconductor sector in 2021.
As much as Canada is known for its fundamental ability to deliver natural resources – agriculture, mining, forestry, fisheries, and oil, we can do much more to leverage opportunities based on our intellectual capital. None of these industries have an impact on jobs, revenue, IP, and GDP the way that the semiconductor industry has. Equally important: it is not as easy to transplant a semiconductor company as it tends to remain where it has been well established. It is no surprise that over the years, AMD Markham has grown its GPU (Graphics Processing Unit) R&D centre and Intel has found it ideal to locate its own GPU R&D centre close by. Not only do you need to build a talented team to do the work but you also need a lot of supporting hardware lab infrastructure – not trivial to relocate.
Canada’s Advantages in Growing Its Semiconductor Sector
Does Canada have any inherent advantages? The short answer is yes – quite a few.
“The availability of talent is the single biggest determinant of whether semiconductors will come to Canada or not.”
To start with, we have excellent engineering universities in Canada – and they are perfectly capable of graduating far more microelectronic engineers than they are presently doing. In fact, the availability of talent is the single biggest determinant of whether semiconductors will come to Canada or not.
Just as important would be encouraging students to enroll in university-level Microelectronics Engineering courses. Talent availability is a fundamental requirement for companies designing microchips or companies looking to set up fabrication plants. Talent availability alone could make the difference for a chip company to locate in Canada. This is critical to all companies no matter at what scale – large, medium or small businesses. But we do have to make sure that concomitant with graduating talent, we are aggressively working towards attracting and building the companies that will keep them here.
“Canada’s willingness to accommodate skilled semiconductor professionals is a major advantage.”
In addition, our labour rates due to our lower exchange rate make us highly competitive when compared to the US. In Canada, we have a highly diverse society which makes it easier for global companies to establish design centres here as they find far less of a culture shock for their relocated staff. Canada’s willingness to accommodate skilled semiconductor professionals is a major advantage.
Moreover, Canada has every chance to be a major player in all segments of the semiconductor industry – but it will require us to be bold, visionary, and move quickly. This starts with governments at all levels – federal, provincial, and municipal. Giant semiconductor companies and their high-paying jobs would be welcome anywhere on earth and we have to make Canada the destination of choice. Having all levels of government aligned, with supportive policies and incentives, would be a great start.
I have had the privilege of working with dozens of Canadian hardware technology startup companies and I can guarantee you – they are second to none anywhere. Canada is known worldwide for its polite and affable nature but there is a competitive, aggressive, faster, and skilled side that the world sees when we get into an ice hockey arena. We play to win. Now we need to show that side in the world of semiconductors.