U.S. is seizing the moment on chips and semiconductors – why can’t Canada?

The past few years brought us many headlines about the “chip shortage” and disruption of the supply chains for everything from trucks to toasters. But you may have missed the flurry of activity since then.

In August, the United States passed the CHIPS and Science Act, authorizing about US$280billion in new funding to spur research and production in semiconductors, a key component in the valuable computer chips that are at the heart of most things we use. Moving quickly, in September U.S. President Joe Biden attended a ribbon-cutting ceremony for new multibillion-dollar Intel chip production facility in Ohio and then in December, Mr. Biden was in Arizona for another ribbon-cutting with semiconductor leader TSMC.

We are seeing a major push by the United States in onshoring its semiconductor supply chain, wary of the security implications if China continues to dominate this important field. Canada needs to appreciate that motivation and be active, engaged and strategic in ensuring its own semiconductor industry does not lose out.

Among Canadian semiconductor companies, there’s a lively debate about whether Canada should ultimately pursue its own long-term goal of a domestic semiconductor fabrication plant, or whether we should focus on value-chain niches where we can play to our strengths.

As a first step, Ottawa should conduct an in-depth inventory of Canadian chip companies and university-based R&D activities that play a role in the broader value chain of components, intellectual property and expertise, to understand our existing strengths and specialties. From there, policy makers should develop a plan in collaboration with industry, with an unflinching focus on building up Canadian companies and ensuring that Canadian innovations lead to Canadian-owned intellectual property within global semiconductor value chains.

Canada was once a leader in semiconductors. But without foresight into how critical this sector has become, our foreign investment strategy allowed for the hollowing out of valuable companies including Tundra Semiconductor in 2009, DALSA in 2010, and Gennum Corp. in 2012.

Canada still has some promising companies in the semiconductor space, such as Tenstorrent, making specialized chips for AI applications, or Ranovus, making high-capacity hardware for network applications. But privately, we also hear the same worrying refrain that shows up in so many conversations around Canadian tech – that cutting-edge semiconductor research funded at Canadian universities is ultimately scooped up and commercialized by foreign companies because we have no national strategy.

Without a focus on owning critical technology, Canada’s semiconductor ecosystem will ultimately emerge as a version of the same old Canadian “innovation” playbook – generous funding for academic research and subsidies for foreign multinationals to set up branch plant operations in Canada.

This exact mentality is what led to the disappointing results on the Canadian AI strategy, and why we have stagnated after an early lead in this technology. We tried courting Microsoft, Google and Uber to open “innovation hubs” in Canada along with lavish funding for academic research without any focus on benefits to local economy. This week, one of those branch plants closed.

If the government doesn’t focus on developing an actual semiconductor strategy that includes a focus on owning intellectual property derived from publicly funded research, Canadians are compromising our national security and simply doing innovation philanthropy for foreign companies – again.