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Fishing for chips: Making the case for a homegrown Canadian semiconductor indust...

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Fishing for chips: Making the case for a homegrown Canadian semiconductor industry

With industry in massive period of flux, some think Canada has an opportunity to build on its innovation legacy and stake a claim in the global tech shakeout

Author of the article:
Barbara Shecter
Publishing date:
Apr 30, 2021  •  3 days ago  •  8 minute read  •  22 Comments
A microchip manufactured by NXP Semiconductors NV, on a printed circuit board (PCB) at CSI Electronic Manufacturing Services Ltd. in Witham, U.K.
A microchip manufactured by NXP Semiconductors NV, on a printed circuit board (PCB) at CSI Electronic Manufacturing Services Ltd. in Witham, U.K. Photo by Chris Ratcliffe/Bloomberg

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Natalia Mykhaylova’s Toronto-based company WeavAir sells sensor and data-collection technology designed to improve air quality, cut maintenance and energy costs, and improve efficiency in places ranging from mass transit hubs to hotels.

Customers and prospective buyers started asking for something that would measure viruses and bacteria in the air after COVID-19 was declared a pandemic last year, but the technology didn’t exist. Mykhaylova, whose background includes degrees in chemical engineering and pharmacology, decided to build it.

Fishing for chips: Making the case for a homegrown Canadian semiconductor industry

“We started work on development of a new technology, a new detector, that can in real time detect the presence of bacteria and viruses in the air,” she said. “We are building a new optical system and we are miniaturizing what is available into a much smaller form … or the size of the device.”

She holds up a small box, not much bigger than a flash drive, which houses the semiconductor she and her team designed. It may be small, but if Canada hopes to carve out a spot in the upheaval roiling the competitive global semiconductor market dominated by the United States and Asia, its best hope may lie with people such as 34-year-old Mykhaylova.

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Natalia Mykhaylova, founder of Toronto-based WeavAir, couldn’t find a semiconductor that would do what customers were asking for. So she and her team built it. Natalia Mykhaylova, founder of Toronto-based WeavAir, couldn’t find a semiconductor that would do what customers were asking for. So she and her team built it. Photo by WeavAir

The nearly US$490-billion global semiconductor industry is in a massive period of flux. Over the past several months, it has been beset by trade wars, supply chain problems and even a factory fire, all of which have been blamed for the chip shortages disrupting the automobile and consumer electronic sectors. The issues were serious enough to prompt United States President Joe Biden’s administration to convene an urgent meeting in mid-April with industry heavy-hitters including the CEO of Intel Corp., and to call for billions of dollars in spending to boost the supply of semiconductors, the silicon and crystal powerhouses of electronic and sensor devices colloquially known as chips.

Demand for consumer electronics and the semiconductors that power them has skyrocketed during the pandemic, further pressuring supplies needed for computers and sensors in the automobile industry, causing massive disruptions. As a result, losses could end up in the billions of dollars and manufacturers in Canada have not been immune. In February, a General Motors Co. plant in Ingersoll, Ont., was idled by the chip shortage, with more than 1,000 workers eligible to collect layoff benefits.

Given the impact across North America, the U.S. has pledged to reclaim ground lost to semiconductor technology and manufacturing powerhouses in Asia, and there is a growing cadre of of professionals in the sector who believe Canada, too, has an opportunity to stake a claim in the global tech shakeout — building on a legacy of innovation dating back to the heyday of Nortel Networks Corp. in the 1990s.

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The Ottawa-based company was once a semiconductor manufacturer, but those operations were sold to Geneva-based STMicroelectronics International N.V. for about $100 million in 2000. Other Canadian high-flyers in the sector before the dot-com bust that year were Mitel Networks Corp. and JDS Uniphase Corp.

Mary Ng, Canada’s Minister of Small Business, Export Promotion and International Trade, said her government is committed to rebuilding cutting-edge tech companies based in Canada. A close relationship between Canada and the U.S. should accelerate this process, she said.

“I see this as an opportunity for Canada and the U.S. to build together, for us to collaborate together (and) then to sell them to the rest of the world,” she said. “Canada has a strategic advantage in the already existing robust relations and preferential access to this market.”

I see this as an opportunity for Canada and the U.S. to build together, for us to collaborate together (and) then to sell them to the rest of the world

Mary Ng, Canada's Minister of Small Business, Export Promotion and International Trade

Ng was on hand in March when the government announced nearly $5 million in funding for Markham, Ont.-based ventureLAB’s Hardware Catalyst Initiative, Canada’s first silicon incubator. She said the decision to invest was easy, given the plan to accelerate the commercialization of homegrown companies that can compete globally in sectors including health care, consumer electronics, telecommunications, smart energy and transportation.

VentureLAB has received $13 million in combined government and corporate funding, and Ng noted there is built-in Canada-U.S. cooperation through a partnership with Silicon Catalyst, the world’s largest incubator for semiconductor startups, which is based in Silicon Valley.

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“The development of these startups and these scale-ups presents an opportunity,” she said, adding that the government is committed to “ensuring that growth is anchored in Canada as they scale and pursue opportunities in the international marketplace.”

WeavAir is among the first 16 startups backed by VentureLab, and Mykhaylova said she hopes to use the testing, business planning and mentorship the incubator provides to get her virus-detecting technology from prototype to production, hopefully by the third quarter of this year.

Melissa Chee, VentureLab’s chief executive, said she believes Canada can develop a hardware industry by scaling up startups and tapping the talent in world-recognized science, math, and technology programs at Canadian universities.

Melissa Chee, VentureLab’s chief executive.
Melissa Chee, VentureLab’s chief executive. Photo by VentureLab

Investing now could, in turn, also make Canada a more appealing place for international chip companies to do business, Chee said. The efforts have already attracted Nuvia Inc., a Santa Clara, Calif.-based silicon design company founded by some of the brains behind the chips that power Apple devices, which, on the heels of raising US$240 million, opened its first international office last year in the Greater Toronto Area.

Chee is fond of quoting a figure from the California-based Semiconductor Industry Association that states each semiconductor job creates almost five indirect jobs in a global industry that generates US$7 trillion in economic activity.

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“That’s a very high multiplier. These are highly technical and advanced manufacturing skill sets, so very important for Canada,” she said, adding that these jobs are integral to expanding the green economy including electric cars.  “I think it really underpins the key sectors we care about … that’s all based on electronics and semiconductors.”

Canada is not a major player in manufacturing semiconductors, with companies such as Teledyne Technologies operating specialty manufacturing facilities in Edmonton and Bromont, Que., while the world’s largest foundries are located in Taiwan, South Korea, China and the U.S.

Canada’s revenue from semiconductor and other electronic component manufacturing is projected to grow to US$3.8 billion dollars by 2024, according to Statistica.com. By comparison, Taiwan Semiconductor Manufacturing Co., the world’s biggest chipmaker, raked in revenue of US$47.78 billion in 2020.

The logo of Taiwan Semiconductor Manufacturing Co (TSMC) is pictured at its headquarters, in Hsinchu, Taiwan.
The logo of Taiwan Semiconductor Manufacturing Co (TSMC) is pictured at its headquarters, in Hsinchu, Taiwan. Photo by Ann Wang/Reuters files

Despite the small size of Canada’s manufacturing base, Chee thinks Canada could eventually grow a large enough industry presence to attract a foundry expansion from Asia, with others suggesting this would provide proximity to the North American market without having to locate in the U.S., where contentious issues including national security have made commercial and trade relations tense in recent years.

But Gordon Harling, a longtime industry player who worked as an engineer at Novatel Communications Ltd. and in research and development at the semiconductor division of Mitel Networks, said Canada gave up the opportunity to stake a claim in large-scale semiconductor and hardware manufacturing more than two decades ago.

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That’s when he sold Goal Semiconductor Inc., a Montreal-based company he founded, to Taiwanese company Mosel Vitelic Inc., which planned — along with Quebec’s Société générale de financement — to build a multi-billion-dollar microchip wafer manufacturing plant in the province. However, the project failed to secure funding from Ottawa and Quebec, and Harling said the cost of such an undertaking has only skyrocketed since then. What’s more, he said, chips are constantly getting smaller, making the expensive manufacturing facilities obsolete in about 10 years.

“I don’t think Canada is going to open the purse wide enough to do that,” he said.

Hand-wringing over Canada’s ability to turn innovative technology into a viable commercial profit centre has been going on for years. A 2007 report by the Information Technology Association of Canada urged the country, and particularly Ontario, to revitalize the “microelectronics” sector to regain ground in a fast-evolving global industry where manufacturing costs were skyrocketing and consolidation was underway.

But instead of trying to compete in what Harling called “commodity” semiconductors, Canada should focus on building niche specialty products, said the chief executive of CMC Microsystems, a not-for-profit that creates and then shares platforms to reduce costs and speed up technology development and adoption.

For example, photonics, which use light to do functions usually carried out by electronics, as well as mechanical sensors (MEMS) and quantum devices.

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This isn’t the kind of chip technology that drives the main computer in a car, Harling said, but it has specialty applications including optical data communication, lighting and displays, which can be used in sectors including manufacturing, telecommunications and health sciences.

“My personal opinion is that Canada probably doesn’t want to compete head to head with China or the U.S. on commodity car computers with very low profit margins,” he said. “But we can make the hundreds of other devices that are necessary for the car.”

Specialized sensors are integral to the automotive industry for the operation of in-car displays, air bags, radar, tire pressure gauges and the like. Silicon photonics can also be used to carry video signals to seat backs in commercial aircraft and eliminates electromagnetic interference with flight systems.

Semiconductors power robotics and other functions at Urban Stalk, a Hamilton, Ont.-based start-up moving agriculture from fields to city centres.
Semiconductors power robotics and other functions at Urban Stalk, a Hamilton, Ont.-based start-up moving agriculture from fields to city centres. Photo by Courtesy Urban Stalk

The technology has applications ranging from autonomous vehicles and bio-medical manufacturing to components for smart cities, clean technology and food security infrastructure.

Harling said the tech’s versatility makes an ideal investment beachhead for Canada to stake a claim in the ongoing chip sector shake-up.

To that end, CMC is getting ready to pitch a five-year, $140-million plan to federal and provincial governments that, if funded, would focus on photonics, mechanical sensors and quantum devices, from research and development through to the building of manufacturing capacity and a supply chain to commercialize made-in-Canada components and systems.

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“All of these technologies are (used) to create advanced components and all are necessary in multiple applications,” Harling said, adding that they require many of the same highly qualified personnel skills, the same “clean room” facilities and similar equipment and processes.

“Being very good at one of them means you can transfer some of those skills to another area.”

He estimated that his organization’s multi-year plan would create more than 4,000 skilled jobs, and suggested that some of the intellectual property would only be made available to Canadian-controlled companies, so the country will be less exposed next time there is disruption in the global chip supply.

“(This is) about growing and reinforcing the value chains in some of the areas where Canada could potentially dominate,” he said.

Mykhaylova, meanwhile, has her own domination plans. Her company, WeavAir, is preparing to take a big step forward this fall to deploy its homegrown, virus-sniffing chip technology.

“We will have a product that is reliable enough to be put in commercial operations to be tested at scale … a couple of hundred to deploy in buildings,” she said.

It’s a small step, perhaps, but one that her backers hope is only the start.

Financial Post

• Email: bshecter@nationalpost.com | Twitter: BatPost

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All Comments

  1. 3 days ago

    Do you folks realize that the rest of the world looks at Canada as not a place to invest because of all the regulations , environmental, taxes and a government that sticks it,s nose where it doesn,t belong???????????????? No way you will ever see a chip factory here..................

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  2. 3 days ago

    2 decades ago Canadian semiconductor leaders did try to work with our government to build or attract a major production facility in Canada - why because this technology needs what Canada has - stable ground, lots of electricity and a highly educated workforce. This effort failed and as Mr Harling says - that train has left the station. Looking forward, to drive this, or any leading edge innovative business there must be an ability to reap reward for the massive investment and risk facing any such business. With this government's massive debt (which threatens higher taxes), it's threat on capital gains inclusion rates and overall propensity to create a poor investment climate, the people that are willing to make these investment are going elsewhere.

  3. 3 days ago

    there were good reasons why Canada didn't have vaccine plants and chip plants. they tend to rely on massive taxpayer support.

    • 3 days ago

      So? The US has massive taxpayer support for NASA, the Military etc that drive innovative technology that in turn drive leading businesses. The result - their income to GDP is $60K US and our is $46K US. Their investments drive the future. Our government tends to prop up old businesses ie Air Canada, the auto industry SNC etc etc and pay lips service to innovation.

  4. 3 days ago

    Semiconductors are in the news due to the current shortages. It would be a mistake to think that now would be the time to get into the industry, as other manufacturers will also be increasing their production capacity. After all the increases in capacity, the market will be saturated, and pricing will become ultra competitive. A Canadian manufacturer would not be able to compete in that type of market. To build now would be a follower in the marketplace, not a leader.

    • 3 days ago

      Semiconductors are a notorious Boom bust industry as risky as the airline industry. Capacity always lags demand by years and the costs to create a FAB grow exponentially with each generation. Look at the problems Intel is having!

  5. 3 days ago

    Problem is wages, taxes and regulations are too high in Canada to compete with Asia

    • 3 days ago

      The laptop I am typing on is from a Chinese company that started with direct assistance from and partial ownership of the Communist Party via its massive R&D arm, the Chinese Academy of Sciences.

    • 2 days ago

      The Japanese semiconductor sector has been in decline for 3 decades. They have 4 significant companies left and Japanese share of the semi market is now about equivalent to the Netherlands. Same with most Japanese electronics companies. Most of what you buy that is branded with a Japanese company logo is made in China.

  6. 3 days ago

    ‘…..That’s when he sold Goal Semiconductor Inc., a Montreal-based company he founded, to Taiwanese company Mosel Vitelic Inc.,…’

    As Peter Newman once said, success for a Canadian entrepreneur was build a business to a size where they could sell it, and retire to Florida.

    And as cliche as it sounds, I know a couple examples of just that.

    A German or Italian would never, ever sell out, and many companies are multi - generation wishing the same family.

    (In one of the examples I know of, the founder told me his two children were studying sociology, and music and had shown zero interest in his 100 employee + he had founded.)

    • 3 days ago

      Lamborghini is now owned by VW. VW is a widely held company. I can give lots of examples of Germans and Italians, and pretty much any ethnicity selling their business. Also there are Canadian owned family businesses that are still family owned. Irving and McCain for example

  7. 3 days ago

    When I was a kid there was the long conversation about ‘why can’t there be a ‘Canadian’ automobile - Sweden has two!

    It would take a book to explain why - and all of it would be negative.

    You would just need to change a few words and apply it here…

    • 3 days ago

      yes, Volvo and Saab. both are Chinese now.

  8. 3 days ago

    ‘….. That’s when he sold Goal Semiconductor Inc., a Montreal-based company he founded, to Taiwanese company Mosel Vitelic Inc., which planned — along with Quebec’s Société générale de financement — to build a multi-billion-dollar microchip wafer manufacturing plant in the province. However, the project failed to secure funding from Ottawa and Quebec, and Harling said the cost of such an undertaking has only skyrocketed since the…..’

    That sums up Canadian ‘business thinking’ in a long sentence.

    The founder selling out - always to a foreign company, and looking to the government to take it to the next level.

    This has been going on as long as the country has existed, and is why virtually any enterprise of size in Canada is a foreign company.

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  9. 3 days ago

    In reality Ms Chee shouldn't be in her role if she thinks that creating a semiconductor manufacturing industry in Canada is a possibility. Wafer foundries - where they make the silicon chips are at least $4B. One core piece of equipment, the photolithography system, for state of the art chips costs $120M. The $13M ventureLAB received wouldn't even cover its operating costs for a year.

    • 3 days ago

      Intel is spending $20B for a new Fab and TSMC is spending one hundred billion! Your numbers are off by a factor of 5 to 25! Also, they would need a new nuclear power plant and a reliable source of high-volume water. That rules out the prairies altogether.

    • 2 days ago

      Wrong there buddy as usual. Small volume fabs can cost $4B, TSMC's new high volume fab is $14B. Read past the headlines. TSMC is spending $100B on FabS -- that multiple facilities for both wafers and packing. This number also includes their R&D spend over the next two years. Also Intel is building two fabs not one. I work with TSMC and know a bit about their company. Get your facts straight for one will you!

  10. 3 days ago

    I have spent the better part of my career in the semiconductor industry. Canada has neither the money nor talent to create a semiconductor manufacturing industry. We can still design great chips but manufacturing requires incredibly deep pockets and a lot of engineering talent that does not exist here.


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