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First Steps for Canada — SILICAN

The first policy report by SILICAN — the Semiconductor Industry Leadership and Innovation Canada Action Network, presenting a roadmap for future policy to grow the Canadian semiconductor sector.

First Steps for Canada — SILICAN

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FIRST STEPS FOR
CANADA
Semiconductor Industry Leadership and Innovation Canada Action Network
POLICY PROPOSALS FROM
LEADING CANADIAN EXPERTS
WHAT CAN CANADA DO?
WHY CHIPS?
OCTOBER 2023
SILICAN is an alliance of chip industry and post-
secondary associations coming together to
ensure that Canada seizes the moment on North
American semiconductor re-shoring and sets the
industry on a path to sustainable success that
builds Canadian prosperity for the long term.
SILICAN brings together the Council of Canadian
Innovators, CMC Microsystems, Deep Tech
Canada, Canada’s Semiconductor Council,
Alliance for Semiconductor Innovation Canada
(ASIC), Optonique, U15 Group of Research
Universities, Canadian Innovation Network,
Colleges and Institutes Canada, and SECTR.
SILICAN will work with federal and provincial
governments, to advocate for semiconductor
industry priorities, and co-develop a made-in-
Canada action plan for strategic leadership in the
global semiconductor value chain.
SILICAN Membership
SILICAN.CA 02
Contact SILICAN:
Laurent Carbonneau, Director of Policy &
Research, Council of Canadian Innovators
lcarbonneau@canadianinnovators.org
Following historic investments in re-shoring chip manufacturing by the Biden
administration in 2022, Canada has a once-in-a-generation opportunity to bolster our
chip industry, create direct and indirect jobs, and to avoid a generational threat of brain
drain to the United States. The outlook for growth in the chip industry – which
generated $600 billion in sales globally in 2021 and is due to hit $1.3 trillion by 2030
thanks to increased demand from new technologies like AI – is extremely positive.
Geopolitical developments in Asia have also created an urgent imperative to bolster
domestic chip capacity to protect Canada’s economic and national security and
sovereignty.
With AI, quantum, net zero and increasing deployment of connected devices, we are
on the cusp of a generational transformation of the industry with huge potential for
disruption of existing players. An opportunity like this might not again come for a
generation or more.
The federal government has made considerable investments in clean tech, AI, EVs and
other fields entirely reliant on advanced chip technology – investing in bolstering the
domestic chip industry will enhance the value of all of these investments and boost
innovation by connecting producers and end users of chips.
There is significant risk in inaction – US investments through the CHIPS Act, much
like clean tech investments in the Inflation Reduction Act, are a significant draw for
companies. Losing new investments, existing industrial expertise and Canadian
semiconductor talent to other jurisdictions are all very real prospects.
The development of the chip industry should be an urgent priority for the federal
government, following a targeted approach to support industry and meet Canada’s
domestic and diplomatic agendas.
Canada needs a staged, methodical approach focused on both people and capital to
compete in this strategic sector. A national approach should focus on growing
Canada’s manufacturing capacity in defined areas of specialization by investing in
cost-effective manufacturing niches, helping to scale up Canadian entrepreneurship,
and promoting talent development and research to strengthen the industry’s base of
human capital.
SILICAN.CA 03
Create a dedicated office or strategy table responsible for chips policy within government or the new
Canadian Innovation Corporation to ensure that Canada’s strategy remains focused on expanding and
supporting commercial excellence.
Seize a generational opportunity, keep deep industrial expertise in Canada and give domestic companies
a significant edge through clustering effects by investing in upscaling the NRC’s Canadian Photonics
Fabrication Centre (CPFC) and allowing it to operate as a standalone world-class commercial pure-play
fab independent of government.
The CPFC is a leading global facility in compound semiconductors (a $112 billion global market),
with few competitors currently operating at significant scale.
As a pure-play fab, the CPFC serves a range of commercial customers instead of one company.
It is currently operating close to capacity and in a few years will be unable to meet the demands of
scaling Canadian companies and international clients.
An upscaled CPFC should maintain reserved research and prototyping capacity for start-ups and
commercialization.
Enhance the Canadian portion of the Northeast Microelectronics Corridor from Montreal to New York
that capitalizes on existing facilities and capabilities delivering advanced packaging and MEMS expertise
in the Bromont cluster, and pursue closer commercial integration of major facilities in Ontario and
Quebec.
Plan to support, in the coming years, professionally managed fabrication and assembly capacity in
research and start-up hubs in Quebec, Ontario, and Alberta that either currently lack the infrastructure to
scale cost-effectively or whose major existing facilities would benefit from modernization or expansion.
The value chain for chips is global and divided into countless specific niches, including many that are a bad
match for Canada or where other countries have insurmountable leads. As a first step, Canada should build
on areas of strength where we can compete and win on a global scale – especially compound
semiconductors and photonics integrated circuits (PICs), as well as micro-electromechanical systems
(MEMS) and sensors, design, and advanced packaging, assembly and testing, as well as in chip applications
of emerging technologies like AI.
In stages, the government should:
Choosing smart areas of focus will help ensure that investments in the chip industry mutually reinforce each
other’s prospects of breakthrough success and foster the growth of a strong, specialized and well-integrated
industry.
SILICAN.CA 04
Directly addressing capital gaps by making targeted, direct
investments in scaling firms through tools like the SIF and its
semiconductor challenge or the Canada Account.
Equipping government with industrial and strategic expertise
by leveraging existing assets like the NRC’s IRAP ITA
workforce, especially as IRAP gains access to new strategic
flexibility within the new Canadian Innovation Corporation.
Deepening domestic capital pools around the semiconductor
industry through credit instruments at institutions such as the
Business Development Bank of Canada (BDC) and Export
Development Canada (EDC).
Meeting the government’s own needs, such as for federal
data centres or compute capacity, with more Canadian
products through a streamlined procurement channel.
The semiconductor industry is globally integrated, and every
company in the sector has clients or suppliers across national
borders. Even given that important reality, Canada should
concentrate on scaling up competitive domestically
headquartered firms into global players with a range of policy
levers.
Strong Canadian companies are the nucleus around which
further investments and talent can be leveraged over the
medium- and long-term to maximize important economic benefits
for Canada, including investment flywheels, innovation spillover
effects, and resilience to business cycle fluctuations.
There are a number of ways Canada could bolster domestic
entrepreneurship and commercialization efforts. Overall, Canada’s
approach should double down on existing industrial strength and
focus, especially in the short term, on export discipline.
The government’s first steps should include:
SILICAN.CA 05
Making the industry an attractive choice for students and workers by investing in creating scholarships,
co-ops and internships across the talent spectrum, from chip design to fabrication plant construction
and maintenance to packaging, assembly and testing.
Support workforce development by providing institutions the information they need to plan to fill talent
needs, including for skilled operators and technicians, by working proactively with industry to
dynamically forecast demand.
Enhancing Canada’s long-term capacity to develop skilled research talent and advance research in
advanced materials critical to the success of the chip industry by boosting support for research in
semiconductor fields through the federal research granting councils or other mechanisms.
Identifying ways to bring top entrepreneurial and technical talent to Canada.
With a disciplined approach around defined specialization areas, having the right people is the next step to
catalyze the growth of Canada’s semiconductor sector. Deloitte research forecasts the global
semiconductor workforce growing by 100,000 people a year to meet growing demand.
Canada should build a robust ‘braided river’ of talent at all levels of the industry by funding top talent
development through advanced basic and applied research as well as identifying and working with
provinces, industry and post-secondary institutions to fill workforce training gaps.
This could include:
SILICAN.CA 06

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First Steps for Canada — SILICAN

  • 1. FIRST STEPS FOR CANADA Semiconductor Industry Leadership and Innovation Canada Action Network POLICY PROPOSALS FROM LEADING CANADIAN EXPERTS WHAT CAN CANADA DO? WHY CHIPS? OCTOBER 2023
  • 2. SILICAN is an alliance of chip industry and post- secondary associations coming together to ensure that Canada seizes the moment on North American semiconductor re-shoring and sets the industry on a path to sustainable success that builds Canadian prosperity for the long term. SILICAN brings together the Council of Canadian Innovators, CMC Microsystems, Deep Tech Canada, Canada’s Semiconductor Council, Alliance for Semiconductor Innovation Canada (ASIC), Optonique, U15 Group of Research Universities, Canadian Innovation Network, Colleges and Institutes Canada, and SECTR. SILICAN will work with federal and provincial governments, to advocate for semiconductor industry priorities, and co-develop a made-in- Canada action plan for strategic leadership in the global semiconductor value chain. SILICAN Membership SILICAN.CA 02 Contact SILICAN: Laurent Carbonneau, Director of Policy & Research, Council of Canadian Innovators lcarbonneau@canadianinnovators.org
  • 3. Following historic investments in re-shoring chip manufacturing by the Biden administration in 2022, Canada has a once-in-a-generation opportunity to bolster our chip industry, create direct and indirect jobs, and to avoid a generational threat of brain drain to the United States. The outlook for growth in the chip industry – which generated $600 billion in sales globally in 2021 and is due to hit $1.3 trillion by 2030 thanks to increased demand from new technologies like AI – is extremely positive. Geopolitical developments in Asia have also created an urgent imperative to bolster domestic chip capacity to protect Canada’s economic and national security and sovereignty. With AI, quantum, net zero and increasing deployment of connected devices, we are on the cusp of a generational transformation of the industry with huge potential for disruption of existing players. An opportunity like this might not again come for a generation or more. The federal government has made considerable investments in clean tech, AI, EVs and other fields entirely reliant on advanced chip technology – investing in bolstering the domestic chip industry will enhance the value of all of these investments and boost innovation by connecting producers and end users of chips. There is significant risk in inaction – US investments through the CHIPS Act, much like clean tech investments in the Inflation Reduction Act, are a significant draw for companies. Losing new investments, existing industrial expertise and Canadian semiconductor talent to other jurisdictions are all very real prospects. The development of the chip industry should be an urgent priority for the federal government, following a targeted approach to support industry and meet Canada’s domestic and diplomatic agendas. Canada needs a staged, methodical approach focused on both people and capital to compete in this strategic sector. A national approach should focus on growing Canada’s manufacturing capacity in defined areas of specialization by investing in cost-effective manufacturing niches, helping to scale up Canadian entrepreneurship, and promoting talent development and research to strengthen the industry’s base of human capital. SILICAN.CA 03
  • 4. Create a dedicated office or strategy table responsible for chips policy within government or the new Canadian Innovation Corporation to ensure that Canada’s strategy remains focused on expanding and supporting commercial excellence. Seize a generational opportunity, keep deep industrial expertise in Canada and give domestic companies a significant edge through clustering effects by investing in upscaling the NRC’s Canadian Photonics Fabrication Centre (CPFC) and allowing it to operate as a standalone world-class commercial pure-play fab independent of government. The CPFC is a leading global facility in compound semiconductors (a $112 billion global market), with few competitors currently operating at significant scale. As a pure-play fab, the CPFC serves a range of commercial customers instead of one company. It is currently operating close to capacity and in a few years will be unable to meet the demands of scaling Canadian companies and international clients. An upscaled CPFC should maintain reserved research and prototyping capacity for start-ups and commercialization. Enhance the Canadian portion of the Northeast Microelectronics Corridor from Montreal to New York that capitalizes on existing facilities and capabilities delivering advanced packaging and MEMS expertise in the Bromont cluster, and pursue closer commercial integration of major facilities in Ontario and Quebec. Plan to support, in the coming years, professionally managed fabrication and assembly capacity in research and start-up hubs in Quebec, Ontario, and Alberta that either currently lack the infrastructure to scale cost-effectively or whose major existing facilities would benefit from modernization or expansion. The value chain for chips is global and divided into countless specific niches, including many that are a bad match for Canada or where other countries have insurmountable leads. As a first step, Canada should build on areas of strength where we can compete and win on a global scale – especially compound semiconductors and photonics integrated circuits (PICs), as well as micro-electromechanical systems (MEMS) and sensors, design, and advanced packaging, assembly and testing, as well as in chip applications of emerging technologies like AI. In stages, the government should: Choosing smart areas of focus will help ensure that investments in the chip industry mutually reinforce each other’s prospects of breakthrough success and foster the growth of a strong, specialized and well-integrated industry. SILICAN.CA 04
  • 5. Directly addressing capital gaps by making targeted, direct investments in scaling firms through tools like the SIF and its semiconductor challenge or the Canada Account. Equipping government with industrial and strategic expertise by leveraging existing assets like the NRC’s IRAP ITA workforce, especially as IRAP gains access to new strategic flexibility within the new Canadian Innovation Corporation. Deepening domestic capital pools around the semiconductor industry through credit instruments at institutions such as the Business Development Bank of Canada (BDC) and Export Development Canada (EDC). Meeting the government’s own needs, such as for federal data centres or compute capacity, with more Canadian products through a streamlined procurement channel. The semiconductor industry is globally integrated, and every company in the sector has clients or suppliers across national borders. Even given that important reality, Canada should concentrate on scaling up competitive domestically headquartered firms into global players with a range of policy levers. Strong Canadian companies are the nucleus around which further investments and talent can be leveraged over the medium- and long-term to maximize important economic benefits for Canada, including investment flywheels, innovation spillover effects, and resilience to business cycle fluctuations. There are a number of ways Canada could bolster domestic entrepreneurship and commercialization efforts. Overall, Canada’s approach should double down on existing industrial strength and focus, especially in the short term, on export discipline. The government’s first steps should include: SILICAN.CA 05
  • 6. Making the industry an attractive choice for students and workers by investing in creating scholarships, co-ops and internships across the talent spectrum, from chip design to fabrication plant construction and maintenance to packaging, assembly and testing. Support workforce development by providing institutions the information they need to plan to fill talent needs, including for skilled operators and technicians, by working proactively with industry to dynamically forecast demand. Enhancing Canada’s long-term capacity to develop skilled research talent and advance research in advanced materials critical to the success of the chip industry by boosting support for research in semiconductor fields through the federal research granting councils or other mechanisms. Identifying ways to bring top entrepreneurial and technical talent to Canada. With a disciplined approach around defined specialization areas, having the right people is the next step to catalyze the growth of Canada’s semiconductor sector. Deloitte research forecasts the global semiconductor workforce growing by 100,000 people a year to meet growing demand. Canada should build a robust ‘braided river’ of talent at all levels of the industry by funding top talent development through advanced basic and applied research as well as identifying and working with provinces, industry and post-secondary institutions to fill workforce training gaps. This could include: SILICAN.CA 06