‘Embarrassingly behind’: Is Canada doing enough on semiconductors?
According to specialists, Canada currently has a unique prospect to participate in the semiconductor supply chain, which is considered a once-in-a-lifetime opportunity. This is due to the heightened sense of urgency caused by tensions in the geopolitical landscape.
Almost all of today's modern technology, ranging from cellphones to washing machines to electric cars, require semiconductors to function. As per Paul Slaby, who is the Managing Director of Canada’s Semiconductor Council, a collective of industry players, approximately ninety percent of the most advanced semiconductor chips are produced in Taiwan. If China ever invades the island and obstructs the exports, this will pose a significant danger for the global supply chain.
According to Slaby, who spoke to Global News, if Taiwan stops producing semiconductors in the next years, the West will encounter serious consequences. In fact, he used the term "cooked" to describe the severity of the situation.
He expressed that it would be a calamity. In an instant, there would be an insufficient supply of chips for smartphones which would lead to an end of producing new smartphones.
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Nvidia, a leading American semiconductor company, is on the verge of achieving a trillion-dollar market cap, thanks to the increased adoption of artificial intelligence (AI) technology worldwide. This AI "gold rush" has brought immense growth opportunities for the company and the semiconductor industry as a whole. Nvidia's products are in high demand for their ability to support complex AI applications and machine learning tasks, making them crucial components for many of today's cutting-edge technologies. As the world continues to embrace AI, Nvidia is poised to remain at the forefront of the industry and reap the benefits of a booming market.
The outbreak of the COVID-19 pandemic gave us a glimpse of the impact that chip shortages can bring. The implementation of restrictions caused a scarcity of cars, and people had to wait for six months to get one. However, if Taiwan is invaded, the situation would worsen, according to Slaby.
The thought of a potential terrible situation has encouraged North America to establish its own system for semiconductor supply. In order to make this happen, the U.S. has designated US$52.7 billion to better the industry through the CHIP and Science Act. This funding aims to support and expand semiconductor production within the country.
Canada has provided a considerable amount of funding, totaling in the hundreds of millions of dollars. In March of this year, they donated $36 million, and in the year of 2022, an even larger sum of $250 million was given. Despite these donations, requests for additional contributions persist.
Slaby expressed his disappointment, stating that they were falling quite far behind in their progress. When attending global conferences and discussing their current situation, it is challenging to maintain credibility when mentioning the amount of $250 million.
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According to Slaby, it is anticipated that a greater sum of money will be allotted in the upcoming federal budget set to be released in the spring of 2024. He is optimistic about getting roughly $5 billion, which corresponds to 10 percent of the funds that the United States has proposed.
Considering the investments made by the United States, what is Canada's potential role in the rapidly growing industry?
The discussion about semiconductors has a lot riding on it, as it involves what top officials often refer to as the "future economy."
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Canada is making efforts to establish a position in the emerging economy by making significant investments in the production of electric car batteries. They have allocated an amount close to $13 billion in incentives for the establishment of a Volkswagen gigafactory in St. Thomas, Ontario. Furthermore, they are presently in discussions to scale up incentives for the development of a Stellantis factory in Windsor, Ontario.
There are some who argue that it may not be feasible to directly compete with the United States.
Canada is investing a significant amount of money to establish electric vehicle factories as a way to contest the subsidies offered by the United States through the Inflation Reduction Act. Even so, attempting to compete with American semiconductor funding totaling $52 billion does not appear feasible, as stated by Gordon Harling, the head of CMC Microsystems, a semiconductor research organization.
According to Harling, Canada would benefit more from working together with others and finding a specific area to focus on in the semiconductor supply chain, and then becoming the leader in that area. Prime Minister Justin Trudeau has suggested that Canada could take a similar approach with semiconductors as it did with the North American auto industry - by manufacturing parts that are assembled elsewhere.
In January, he stated that our primary concern is to ensure the participation of Canada and its citizens in the semiconductor community.
Is Taiwan's semiconductor industry capable of defending itself against potential aggression from China? This is the question posed by the term "Silicon Shield," which refers to the role of Taiwan's world-leading semiconductor manufacturing sector as a strategic asset in protecting against Chinese military threats. With tensions between Taiwan and China running high, many experts view this industry as a key tool for maintaining Taiwan's independence and security.
According to Harling, the construction of an advanced production plant usually requires a budget ranging from $20 to $40 billion. Therefore, an investment of only $5 billion would not suffice and would require settling for outdated technology.
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An area that he suggests Canada should concentrate on is sensors. Sensors are essential in the production of items like electric cars.
In my opinion, Canada has the potential to innovate in advanced technologies that don't necessarily conflict with the United States, but rather work together with them," he expressed.
Harling mentioned that technologists from Canada possess exceptional design skills, specifically in the area of packaging.
Slaby acknowledges the importance of Canada's cooperative stance with the U.S. instead of a confrontational one. Additionally, there is potential in shifting the focus towards specialized chips as opposed to more complex ones that come with a facility price tag of $20 billion, while the former cost between $500 million to $2 billion. For instance, Slaby highlighted the advantages of photonic semiconductors, which can send data at the speed of light and have practical uses in 5G telecommunications. As compared to advance logic chips, which are used in microprocessors for computers, specialized chips are a more economical option.
According to Harling, Taiwan is currently an economic ally, but they're at risk if China chooses to invade. They are also significantly farther along in advanced chip technology, a significant difference that cannot be easily overcome.
Slaby suggested that we should act intelligently. He questioned why we should engage in a fight that we will probably lose.
Canada should remain focused to gain massive benefits.
Slaby mentioned that if managed well, Canada's semiconductor industry has the potential to become more profitable than its auto industry.
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"This is a chance that comes once in a lifetime."
Using information sourced from Sean Boynton at Global News.
The blog post belongs to Global News, which is a subsidiary of Corus Entertainment Inc. The copyright is reserved for the year 2023.
