Thursday, July 18, 2024

Ottawa gives $120-million for semi-conductor startups and training

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Innovation, Science and Industry Minister Francois-Philippe Champagne, makes an announcement regarding the manufacturing and marketing of semiconductors in Montreal, on July 4.Christinne Muschi/The Canadian Press

The federal government is investing $120-million in an initiative to boost Canada’s semi-conductor industry, which is facing intense competition in light of new critical technologies and major spending by global economies.

The investment from Industry Canada through its Strategic Innovation Fund was announced by Industry Minister François-Philippe Champagne in Montreal Thursday morning. It will support Fabrication of Integrated Components for the Internet’s Edge (FABrIC), a five-year program to boost chip businesses and train students.

It’s the latest element of Canada’s strategy to grow its chip value chain, as developments in artificial intelligence, cleantech and electric vehicles heighten the need for advanced chips, and amid escalating geopolitical tensions involving Taiwan, the world’s leading chip manufacturer.

Meanwhile, CMC Microsystems, the Canadian not-for-profit behind the initiative, has expanded into the U.S. in order to sell its services to private companies, and says it would move to a for-profit model in Canada as well should its government funding stop in the future.

Founded in 1984, CMC helps the Canadian semi-conductor industry by buying expensive tools and manufacturing runs, and splitting the costs between startups and academics who could not afford them alone. It also provides engineering expertise and skills training.

Semi-conductors are physical components that control the flow of electric current in microchips, which are essential to almost every electronic device, from LED light bulbs and blenders to EVs and rocket ships.

Of the $120-million from Ottawa, $63-million will go to subsidies for Canadian companies working with CMC, allocated through a third-party governance committee; $37-million will be spent at Canada’s existing manufacturing facilities to develop new “fab” processes; and $20-million will go toward tools and training for universities.

Gordon Harling, CMC’s president and chief executive officer, first proposed the FABrIC initiative in 2021. The U.S. introduced its CHIPS Act in 2022, and while it has spent the majority of its $53-billion funding on building chip fabrication plants, FABrIC will instead be focusing its investments in building skills in specialized areas such as photonics, quantum technologies and micro-electromechanical systems (MEMS).

“We’ve chosen areas that have long life, high growth and are very unique. I think we can dominate globally in these areas,” Mr. Harling said.

The funding is conditional on CMC raising $40-million from the provinces to put toward increasing company subsidies. Mr. Harling said he has already been in discussions with Ontario, Quebec, Alberta, British Columbia and Nova Scotia to secure support.

CMC also operates in 16 other countries and recently started offering its services in the U.S. to join proposals there and take advantage of CHIP Act funding. U.S. companies pay five to 10 times as much as Canadian companies do, as CMC’s services here are subsidized by the government.

Already, CMC has attracted attention from American startups, and a potential project to support hundreds of research groups through a University of Purdue-led project, Mr. Harling said.

Despite the possibility for “big money,“ Mr. Harling said CMC will continue to operate as a not-for-profit in Canada as long as the government is willing to subsidize it. But if that support ended, the organization would have to consider a for-profit model to support itself. The organization got a glimpse of that possibility last year, when CMC was passed over for funding by another body, the Canada Foundation for Innovation.

“We get paid for our work and we’ll use that to cover our expenses outside of FABrIC. The money will flow to the benefit of Canada.” Mr. Harling said. “We’ll do that in the background so that the next time our funding all drops away, we’ll be able to survive and keep our people.”

He says all funding from Canadian governments is tracked separately from CMC‘s international business to ensure Canadian taxpayer dollars are being used on domestic startups only.

Among those Canadian companies supported in their early days by CMC is Ranovus, which makes advanced silicon chips. Hamid Arabzadeh, the company’s chief executive officer, called the non-profit the “glue” of Canada’s chip ecosystem, and said the funding will help train employees which will benefit later-stage chip companies in Canada as well.

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