Canada’s tech industry says heightened tensions between China and Taiwan are a reminder to companies how important it is to seek out a wider range of semiconductor sources and invest in the sector.
Relations between the two Asian countries have become increasingly strained in recent months as China, in a show of might, has carried out military exercises around Taiwan, home to the world’s largest contract microchip maker.
If tensions persist and go beyond a fiscal year, shipments of Taiwan Semiconductor Manufacturing Company (TSMC) semiconductors, known as chips, to major brands could slow or be halted. TSMC chips power a slew of electronic devices ranging from iPhones to Lockheed-Martin fighter jets.
“We are exposed, of course, like every country in the world is exposed,” said Hamid Arabzadeh, chief executive of Ranovus, an Ottawa-based technology company.
Taiwan was responsible for 60% of global revenue in 2020 for the sector and TSMC held 53% of the global foundry market in the third quarter of 2021, wrote Taipei journalist Matthew Fulco in a Macdonald-Laurier Institute publication published in April. January.
The article adds that the company, which eclipses Samsung’s 15% market share with 85% of the market, is of particular importance because it holds a “near-monopoly” on the most advanced chips – 10 nanometers or less -. and control their production. with less energy.
Meanwhile, Canada lacks semiconductor foundries, and building new ones to rival TSMC’s capabilities would be so capital-intensive and time-consuming, Arabzadeh said, that it’s almost inadvisable.
Keith Jackson, then president of the Semiconductor Industry Association in the United States, told Fortune magazine in 2020 that such facilities can cost up to $20 billion to build, almost twice as much as a carrier. modern aircraft.
Manufacturing is tedious. It can take three months to etch and transform silicon wafers into semiconductors, and the process can be turned upside down by a disturbance as small as a speck of dust.
But there are ways to offset the impacts of geopolitical tensions that could disrupt semiconductor shipments without building more foundries in Canada, Arabzadeh said.
The best way is dual sourcing, where companies have multiple suppliers, so if one has problems, another can step in with the product. However, switching from one source to another may require software modifications.
“As soon as the situation with China arose, I’m sure all of the consumer semiconductor companies in Canada and around the world started to rethink…to have chips that would be made in all the different parts world, not just in Taiwan,” Arabzadeh said.
The diversification push has happened over the past two years in part because of a global chip shortage caused by COVID-19 shutdowns, growing demand for electronics and rising shipping costs.
The U.S. government has been at the forefront of the push with a flurry of multibillion-dollar investment in chip factories, as the country fears it is overly dependent on Taiwan and other Asian suppliers for chips. processor used in smartphones, medical devices and cars.
TSMC intends to build a factory in Arizona which is expected to open by 2024.
“A lot of companies have started looking for alternatives (to Asia), so you’ll see Samsung slowly gaining market share,” said Joe Deu-Ngoc, co-founder of Toxon Technologies Inc. and Tincubate in Waterloo. , Have.
“TSMC is no longer the only game in town and many companies are also considering… setting up these foundries or factories outside of China and Taiwan.”
Canada has not gone that far. However, he launched a $150 million fund in February to invest in the development and supply of semiconductors and gave $90 million to the National Research Council’s Canadian Photonics Manufacturing Centre, the only compound semiconductor foundry in North America that is publicly operated and open to all for use.
“Other countries have invested billions of dollars,” said Melissa Chee, a member of the Canadian Semiconductor Council and president of the VentureLab technology center in Ontario’s York Region.
“These are orders of magnitude that Canada may not be ready to invest in, but that certainly doesn’t mean we’re not going to play strategic value and be part of that supply chain in the future. .”
While she acknowledges that the country currently has “limited opportunities” for mass chip manufacturing, she sees semiconductor design happening in Canada and more companies looking to outsource their operations.
It made him believe that the shortages of the past few years and ongoing geopolitical tensions are a chance to reshape the country’s chip processes, for the better.
“Where there is disruption, there is always opportunity,” she said.
“It’s a truly Canadian moment…which will form the foundation of some of Canada’s long-term competitive advantage.
— With files from the Associated Press
Tara Deschamps, The Canadian Press
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