Canada should be aspiring to be more than a branch-plant economy

TORONTO—A little more than a year ago, as Industry Minister François-Philippe Champagne proclaimed that “our government wants Canada to be a strategic global leader in the semiconductor industry,” as he announced a $150-million Semiconductor Challenge Callout. This callout, his department said, was to invite “large-scale ideas from industry and other ecosystem players that address how Canada can build on existing R&D and manufacturing strength, contribute to a national network and supply chain and position Canada as a critical global supplier of specialized semiconductors manufacturing.” These are big aspirations. But an important question is whether the government will focus on building a Canadian-owned and headquartered corporate community that has the scale, talent, and intellectual property to make us a serious player, or whether the policy depends largely on more subsidies for foreign corporations to locate here along with the ongoing takeover of potentially important Canadian firms by these multinationals. Certainly, Champagne has his eye on attracting the multinationals. “Whether it’s high-value or large-scale manufacturing, we want to see Canada be home to the world’s leading semiconductor manufacturers,” he said. But we should aspire to be more than a branch-plant economy that spends its money to develop talent, create intellectual property and provide investment subsidies to companies from the rest of the world. Foreign investment can add to our strengths, especially if it includes a commitment to develop Canadian suppliers and enable domestic niche players to develop “black boxes” of intellectual property in global supply chains of these corporations. Nor are all takeovers bad—our companies also take over businesses in other countries. But we need a clear view of which firms strategically matter. This is why the creation of SILICAN—the Semiconductor Industry Leadership and Innovation Canada Action Network—matters. An initiative of the Council of Canadian Innovators, it bring together Canada’s Semiconductor Council, CMC Microsystems, Ortonique, ISEQ, the Alliance for Semiconductor Innovation, the Canadian Innovation Network, and the U15 Group of Canadian Research Universities to work with federal and provincial governments to develop a “made-in-Canada action plan for strategic leadership in the global semiconductor value chain.” Success will mean more than simply growing the industry. It must help build a core of world-scale Canadian-owned companies in the global semiconductor value chain. If policy can't accomplish this, then it will be a failure. Fortunately, the Council of Canadian Innovators will be a strong voice in speaking up for Canada and our companies. But this will take much hard thinking and great determination. In late March, the federal government announced a subsidy of $36-million for Ottawa-based Ranovus Inc. The money is to support the company’s $100-million expansion of its production capacity for semiconductor products and services. Ranovus has developed technologies that fill an important niche in the digital world. This is the feds' second investment in Ranovus; in 2018 it received $20-million from the Strategic Innovation Fund. It has also received $13.5-million in funding from the Sustainable Development Technology Fund. Earlier this year, Prime Minister Justin Trudeau announced a $40-million grants to a leading Canadian quantum computing company, Xanadu Quantum Technologies, towards its $177.8-million plan to advance its quantum computing system. But what happens if a foreign firm tries to buy Ranovus or Xanadu? Probably nothing. A couple of weeks before the Ranovus announcement, another promising Canadian semiconductor company, GaN Systems Inc. was acquired by the German chipmaker Infineon Technologies for US$830-million. As with many such sales, the opportunity was lost to grow a promising home-grown tech company into a Canadian-headquartered and owned global-scale business, with all its potential. There is no active Canadian policy to provide an alternative to these takeovers, and no apparent desire to invoke the national interest as a reason to step in. Canada spends much money educating talent and attracting expertise from abroad, investing in university-based research for new knowledge, and funding the early-stage development of companies seeking to commercialize new knowledge and create intellectual property. The early-stage development of firms is a screening process to sort out new ideas—many do not survive, but some, like GaN, do and go on to build and grow. Once successful, foreign corporations then move in to buy them if they can. In effect, Canada produces seed corn for multinationals which go on to capture the benefits, including talent, intellectual property and the future growth benefits. If we are serious about building a competitive and innovative Canadian role in the global semiconductor industry, with wealth creation and good jobs for Canadians, how do we do this if we don’t move beyond providing seed corn for others? There is nothing new in this. There is a long history of foreign corporations buying up our businesses of the future. One of the largest was the 2006 takeover of ATI Technologies, a leader in graphics chips, by U.S., chipmaker AMD for US$5.4-billion. In 2007, Genesis Microchip, a specialized chip provider, was acquired by the European semiconductor company STMicroelectronics. In 2009, Tundra Semiconductor was acquired by American tech firm Integrated Device Technology. In 2010, DALSA—a world leader in sensor technology—was acquired by Teledyne, a U.S. corporate giant. In 2012, Gennum Corp., a world leader in semiconductors for hearing aids, was acquired by California-based Semtech Corp. Last year Semtech also acquired Sierra Wireless of Vancouver. Between 2006-2022, IBM acquired 17 Canadian tech companies, and Google acquired 12. How do we build a Canadian role in semiconductors if so many of our best companies are snapped up by foreign corporations? How much lost opportunity has there been because of past takeovers? If we want a more independent Canada, we have to build the talent, own the technology, and grow companies so that wealth is created here, and the critical decisions for our future are made here by the people who live here, have their families here, and have the biggest stake in what kind of country we can become. David Crane can be reached at crane@interlog.com. The Hill Times

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Canada should be aspiring to be more than a branch-plant economy

If we want a more independent Canada, we have to build the talent, own the tech, and grow firms so wealth is created here and the critical decisions for our future are made by the people who live here with the biggest stake in what kind of country we can become.

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