Canada has a unique chance to integrate itself into the semiconductor supply chain, as experts emphasize the urgency of the matter due to geopolitical tensions. Semiconductor chips are essential components in modern technology, from cellphones to electric cars to washing machines. Currently, the majority of leading-edge semiconductor chips are manufactured in Taiwan, posing a significant risk if China were to invade the island and restrict its export. According to Paul Slaby, managing director of Canada’s Semiconductor Council, the West would face a disaster if it were cut off from semiconductors produced in Taiwan, resulting in a shortage of chips for smartphones and other devices.
The COVID-19 pandemic offered a glimpse of what chip shortages can do when restrictions led to limited supplies of cars and extended waiting lists. However, an invasion of Taiwan would exacerbate the situation. To mitigate this risk, North America has been motivated to build its own semiconductor supply chain. The U.S. has already announced substantial funding of $52.7 billion for the industry through its CHIP and Science Act. Canada has also allocated hundreds of millions of dollars in funding, but there are calls for even more investment.
According to Slaby, more funding is expected to be allocated in the next federal budget, and he hopes for approximately 10% of what the U.S. has committed, which amounts to around $5 billion. Considering the U.S. investments, Canada must position itself in the growing semiconductor industry. Direct competition with the U.S. may not be practical, but Canada can play a collaborative role and find a niche in the semiconductor supply chain. Prime Minister Justin Trudeau has suggested that Canada could contribute to the industry similarly to its role in the North American auto industry, building parts that are assembled elsewhere.
One recommendation is for Canada to focus on sensors, particularly for electric vehicles. Gordon Harling, the president and CEO of semiconductor researcher CMC Microsystems, suggests that Canada can excel in advanced technologies that complement, rather than directly compete with, the U.S. Canadian technologists are known for their expertise in packaging and design. Slaby supports a collaborative approach with the U.S. and suggests exploring opportunities in more specialized chips, such as photonic semiconductors used for 5G telecommunications. Taiwan currently has a significant lead in advanced chip technology, making it challenging for Canada to compete head-on. Therefore, Canada should proceed strategically to maximize its potential gains.
If Canada navigates the semiconductor industry effectively, it could surpass the value of the country’s auto sector. This represents a once-in-a-lifetime opportunity that requires careful planning and execution.
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