Global Chip Shortage The global chip shortage is the wake-up call Canada needs
Melissa Chee is president and chief executive officer of ventureLAB, a leading technology hub in York Region that operates Canada’s only hardware and semiconductor incubator, the Hardware Catalyst Initiative
What do video games, ventilators and vehicles have in common? They’re all powered by tiny computer chips with individual transistors as little as a nanometre – 75,000 times smaller than a strand of hair.
Also known as semiconductors, these chips are the brains that underpin almost all the electronic products Canadians rely on. Smartphones? Hearing aids? Dishwashers? They all rely on chips. But because COVID-19 has wreaked havoc on global supply chains, our access to these essential electronics has been severely limited.
First, Canada’s medtech sector was caught off guard by the shortage. When the pandemic struck, we couldn’t ramp up imports of desperately needed ventilators fast enough, or produce the chips that power them ourselves.
Now, a year later, our autotech sector is vulnerable to the whims of offshore manufacturing. Spurred on by a spike in demand for home electronics, the constrained supply of chips has stalled production at General Motors, Chrysler and Honda plants across the country, resulting in layoffs and revenue losses.
But as they say: Never let a crisis go to waste.
If we’re serious about building a stronger post-COVID economy, we can no longer rely on a supply chain that’s beyond our control. Look at the recent shipping crisis in the Suez Canal to see why being handcuffed to volatile imports can be precarious. Instead, we need to generate a domestic supply of chips, and reap the wide-ranging benefits that come with bolstered hardware capacity.
Here’s why the chip shortage is the wake-up call that Canada’s economy needs.
1) FUTURE-PROOFING OUR ECONOMY
How do we do this? By prioritizing domestic research, development and manufacturing of semiconductors.
The federal government has recognized AI, 5G, cybersecurity and quantum computing as priority sectors, but none of these technologies work without a steady supply of chips. For Canada to advance to the forefront of the world’s innovation economy, we must acknowledge the production of semiconductors and related electronics as another priority sector. It’s also the only way to be prepared for the next economic crisis or global pandemic.
2) BUILDING THE JOBS OF TOMORROW
Resource extraction will likely always have a role to play in Canada, but a thriving modern economy cannot be based on exporting raw materials, only to buy them back as final products after they’ve been processed overseas. Rather, a bold new vision is needed – one in which Canada forges an identity as an exporter of manufactured goods.
Whether it’s by turning critical minerals into silicon for chips, or lithium into batteries for electric vehicles, harnessing natural resources to build advanced technology should happen in Canada, not overseas.
By moving beyond commodity-based exports, we can establish our own high-tech supply chain to meet the growing domestic and global demand for chips in sectors such as automotive, medical, mining and agriculture. Ramping up our chip infrastructure will also help us meet Canada’s bold carbon reduction targets and transition to a green economy, which is reliant on billions upon billions of chips and semiconductors.
Of course, building the companies of tomorrow means filling them with the jobs of tomorrow. A made-in-Canada semiconductor industry is only as good as the pipeline of professionals that fuels it. Whether by retaining our best and brightest STEM leaders, or by recruiting top talent from around the world, a thriving chip sector means good-paying, transformational careers. And because every new semiconductor job creates about five other tech jobs, a domestic chip industry can play a major role in our post-COVID economic recovery.
3) PUTTING CANADA ON THE MAP
Canada’s tech sector is growing, but it must evolve beyond its primary focus on software. With a GDP of $2.3-trillion – roughly the size of South Korea, a major chip producer – there’s no reason Canada cannot become a strong player in the semiconductor sector. Chips help create about US$7-trillion in global economic activity, and catapulting homegrown startups into those markets is exactly what we’re doing at ventureLAB’s Hardware Catalyst Initiative. But that effort requires a mix of government funding, venture capital, angel investment, and much-needed access to industry expertise and costly tools.
The barriers to entry for chip manufacturing are steep, but the return on investment speaks for itself. Growing a critical mass of anchor companies that are built up to scale in Canada – rather than starting here and then exiting at low valuations – is the key to attracting billions of dollars in global investment.
A thriving semiconductor sector also means countless patents being filed and intellectual property created. But growing Canada into an industry leader isn’t just about owning the patents, it’s about owning the podium.
This year’s global chip shortage has exposed the shortfalls of Canadian innovation, but it has also uncovered opportunities to build a more resilient, advanced and sustainable economy. Now it’s up to us to pave a new path forward – one nanometre at a time.