The COVID-19 pandemic has upended the global semiconductor industry and created a major chip shortage that is affecting autos, computers and other industries around the world. Semiconductor producers are now scrambling to increase production. They are striving to meet demand in an ever-increasing market, which is projected to grow from US$452.25 billion to US$803.15 billion by 2028.
With this shortage comes opportunity for investment and the emergence of new players in the semiconductor industry—including Canada. The country’s advantages in this space perfectly position it to lessen the semiconductor shortage.
Semiconductor companies in Canada
Canada is already home to some of the world’s largest semiconductor producers and designers, including TSMC, Samsung Electronics, AMD, Qualcomm and Intel. They are drawn by Canada’s trade agreements affordable utilities, highly skilled workforce, institutional support and leadership in artificial intelligence (AI). Many are conducting R&D and semiconductor chip design, such as at TSMC’s “Design Center” in Ottawa, Ontario, at AMD’s campus in Markham, Ontario and at Intel's Design Center in Vancouver, British Columbia.
Other companies, such as Teledyne Technologies and 5N Plus, are leveraging Canada’s expertise in advanced manufacturing to produce precursor components and speciality semiconductors.
Homegrown Canadian companies are also making their mark. MOSAID maintains a history of R&D innovation in Dynamic Random Access Memory (DRAM) semiconductor chips and WeavAir is hard at work putting its virus-detecting computer chip technology into production.
Canada’s Advantages for Semiconductor Manufacturing and Design
Trade Footprint and Tariff Regime
Canada provides semiconductor chip manufacturers and designers preferential market access through 15 free trade agreements to 51 countries with nearly 1.5 billion consumers and a combined GDP of US$49.3 trillion.
Canada maintained the free flow of goods and services throughout the pandemic. The resilience of Canadian supply chains ensures the country remains a stable and accessible jurisdiction for advanced manufacturing activities.
Furthermore, the Government of Canada has eliminated over 1,500 tariffs on manufacturing inputs, machinery and equipment, making Canada first country in the G20 to become a tariff-free zone for manufacturers. This tariff regime provides semiconductor producers in Canada a competitive advantage to import manufacturing inputs, advanced machinery and equipment duty free from around the globe.
Clean Energy Usage
A key similarity among the world’s major manufacturing locations is reliable access to freshwater, which gives Canada a clear advantage: 70% of the world’s freshwater supplies are located here. Canada is capable of supplying semiconductor manufacturers at a comparatively affordable price, as industrial water use in Canada is highly efficient and is usually recycled.
Additionally, Canada is the 6th largest electricity generator in the world and 60% of the country’s energy is generated through hydroelectricity. Manitoba, Quebec and British Columbia all generate at least 91% of their electricity through hydro. Similarly, 96% of Ontario’s electricity mix is generated through non-emitting sources.
Electricity in these regions is extremely affordable. Quebec has some of the lowest utility costs in North America with industrial users paying only 3.3 cents per kilowatt hour (c/kWh). Manitoba charges 3.74 c/kWh and British Columbia, 5.6 c/kWh.
Given that Canada is rated very low in risk of natural disasters, these advantages ensure the semiconductor chip manufacturing process remains clean, affordable and safe from interruptions.
A Sought-After Workforce
Canada produces some of the most talented STEM graduates in the world and they are highly sought-after by global semiconductor companies.
The availability of qualified engineers in the labour force in Canada is greater than in any other G7 country, and the country is also number one in the G7 for higher-education sector R&D performance. Likewise, nearly a quarter of all post-secondary enrollment in Canada was in computer and electronics-related programs in 2019.
Because of the significant difference in cost of living, the average electrical engineer wage in many Canadian jurisdictions is around $85,930.00 per year, making Canada more affordable in terms of labour costs than competing jurisdictions such as Texas, Arizona and Oregon in the United States1. These differences in labour cost apply to tech workers as well.
Should semiconductor manufacturers or designers require specialized skills not widely available in Canada, the Global Skills Strategy allows employers to bring in workers easily and efficiently from all over the globe.
Leadership in Artificial Intelligence and Machine Learning
The application of AI and machine learning will dramatically accelerate the semiconductor industry over the next few years, generating between $35 billion and $40 billion per year in the short term, and up to $95 billion in the long-term. McKinsey and Company estimates that AI will decrease semiconductor manufacturing costs (both cost of goods sold and depreciation) by up to 17 percent.
Canada is the first country in the world to create a national AI strategy, and its world-leading expertise in this space make it the perfect location to build the industry’s future. The federal government commissioned $125 million over five years to advance research and innovation in the AI field and develop a skilled talent pool. As a result, Canada now ranks 4th in the world for competitiveness in AI implementation, innovation and investment.
Samsung Electronics is already leveraging Canadian AI expertise to improving its manufacturing capabilities. In 2019, the company announced the expansion of its Samsung Advanced Institute of Technology (SAIT) artificial intelligence Lab Montreal to leverage the world class expertise at the Montreal Institute for Learning Algorithms (MILA) towards more efficient semiconductor manufacturing processes.
Semiconductor Innovation Centers and Manufacturing Hubs
The long-term growth of the semiconductor industry in Canada is supported by numerous innovation centres and manufacturing hubs across the country.
On the West Coast, the University of British Columbia’s Materials Engineering Department focuses on semiconductor research, specializing in developing smaller, faster, lower-cost and more energy efficient Group IV semiconductors. Vancouver is a top manufacturing hub with a particular strength in electronics manufacturing.
The Edmonton Metropolitan Region is another major manufacturing center that specializes in computer and electronic manufacturing, and boasts the highest per capital manufacturing sales in the country. The region is also home to Amii, an Alberta-based non-profit institute that supports world-leading research in AI and machine learning.
In Ontario, the Waterloo Region is major tech and manufacturing hub where semiconductor companies can leverage the largest engineering school in the country. The nearby Vector Institute in Toronto equally offers world class expertise in AI. Ottawa has a semiconductor industry at the cutting edge of computer chip technology with North America’s only “pure play” compound semiconductor foundry.
Montreal, Quebec is a major semiconductor manufacturing and research center. Polytechnique Montreal is home to the Nano and Quantum Semiconductors Laboratory which focuses on shaping the form and function of semiconductor materials down to the atomic level. The city’s AI ecosystem has the largest concentration of academic researchers in deep learning in the world.
Dalhousie University in Nova Scotia is home to Canada’s Research Chair in Ultrafast Science, Kimberley Hall, whose research group uses femtosecond lasers to investigate charge and spin dynamics in semiconductor materials with the broad objective of developing new semiconductor technologies.
Institutions Supporting the Semiconductor Industry
Canada has several institutions advancing the country’s competitiveness, trade partnerships and supply chain resilience—ultimately making it the destination of choice to invest in semiconductors.
The Advanced Manufacturing (NGen) Supercluster connects manufacturers, technology providers, researchers, schools, government, investors and business networks to accelerate the design and adoption of next-generation manufacturing technologies.
Likewise, Ontario's Advanced Manufacturing Consortium (AMC) is a new initiative created to advance innovation capacity in the manufacturing sector. It provides the manufacturing industry with easy access to world-class facilities to drive innovation and transition to Industry 4.0.
CMC Microsystems is a national organization focused on hardware development. They provide engineering students at 60 universities across the country with software training, specialized tools for hardware design, and actual prototype chips for study.”
ventureLAB’s Hardware Catalyst Initiative is Canada’s only lab and incubator for founders building hardware and semiconductor-focused products. This competitive program enables tech companies building foundational technologies related to AI, clean tech, IoT, and beyond, to become competitive players in the global semiconductor industry.
Founded in partnership with ventureLAB, Dell, and AMD, Canada’s Semiconductor Council has been established to build a Canadian national semiconductor strategy and action plan that will propel Canada to the forefront of the global semiconductor industry as a major developer, manufacturer and supplier.
Finally, Canada provides attractive incentives and services for companies looking to design and manufacture semiconductors in the country:
- Strategic Innovation Fund (SIF)
- Accelerated Investment Incentive
- Scientific Research and Experimental Development (SR&ED) Tax-Credit Program; and
With these incentives, Canada provides the business environment needed to make new semiconductor projects a success.
As the effects of the semiconductor shortage continue to ripple throughout the global economy, Canada offers advantages necessary to boost supply. Its trade footprint, affordable utilities, low-risk environment, highly skilled workforce, institutional support and leadership in artificial intelligence (AI) all directly address the crisis and serve to provide the environment necessary for the industry’s successful post-pandemic future.
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