TechopiaLive: Chipset famine and Canada's opportunities

During the pandemic, many businesses and consumers have experienced problems related to an ongoing shortage of semiconductor chips. That “chipset famine” is manifesting itself in a shortage of automobiles, computers, smartphones and other devices. In this episode of Techopia Live, OBJ publisher Michael Curran speaks with a technology sector veteran with more than 30 years of experience in semiconductors. This is an edited transcript of this episode, which features a discussion with the president and CEO of CMC Microsystems, Gordon Harling.

OBJ: Listen, I want to get to know you a little bit. Give us your bio facts here, Gordon.

GH: I did a bachelor's in applied science at U of T and then a master's in engineering physics at Polytechnique Montreal, and I worked for 10 years in large R&D companies. I eventually became the director of processes and R&D and at Novotel I did some IC design for smartphones back in the 80s. Then I did 20 years of startups and two of them sold. I was involved in lots of very interesting companies, both in the semiconductor design and intellectual property businesses. The last 10 years, I've been doing not-for-profit economic development. Four years ago, I joined CMC Microsystems. They were looking to change their funding model and revitalize the company, so I've really been enjoying myself here.

OBJ: So you're the president and CEO and, as you indicated, it's a non-profit. I think part of what you're trying to do is work with academics and research institutions. Tell us more about CMC.

GH: It was founded in 1984 with (Pierre Elliot) Trudeau the father's assistance. And what we were trying to do was provide access to design tools for semiconductors and also access to fabrication. The factories that make semiconductors don't want to deal with hundreds of small buyers. So what we do is we aggregate them. We'll bring in hundreds of designs and, in fact, this year we're doing almost 400 designs. We bundle them together. We submit a single design to the factory, they build it and then we cut up all the designs and ship them to the appropriate partners. So no one gets to see anyone else's design. We're a neutral third party broker. That allows them all to build in real commercial factories where they couldn't possibly afford the service. We might pay $200,000 for access to a service. And we divide the bill among 20 different researchers so they each get a bill for $10,000 a piece. Everyone's happy.

OBJ: Tell us a little bit more about what you think is happening when it comes to a shortage of semiconductors, specifically as it relates to Canada.

GH: It's kind of a good news story for the semiconductor industry because it’s had three years of double-digit growth. People were buying new phones and laptops and tablets in order to work from home. So the industry's been going crazy and that's the kind of growth that it’s not really used to. To get started up and to build more capacity takes quite a long time. Just ordering some of this really high-tech gear might take anywhere from 18 months to two years. So they started to place those orders a year or two ago but it's gonna be a little while now before the capacity actually starts to roll out. But I think that there's a year or two left in this, and then they'll have caught up. There's real growth there. When some people see available semiconductors, they might be snapping them up and inventorying them. As long as they're holding an inventory of these things because they're afraid they might not be able to get them later, that's aggravating the problem.

OBJ: Obviously a complicated situation and it might be a little bit farther down the line before we can resolve this. What can Canada be doing, including Ottawa companies, to become less dependent on foreign chip suppliers?

GH: It is difficult to tackle those problems because the technology is very complicated. The investments are enormous, so you see all of these announcements in other countries where they're throwing money at the problem. That money is going to create new fabrication capacity which in a couple of years is going to be superfluous. So in Canada, what we do have is some very exotic niches where we have real strength, and these niches don't require a massive capital injection. They require real know-how and design skills. So we have a proposal that addresses that. I make the point when I talk to people about this that, in a car, there might be 10 or 12 microprocessors that are built in Taiwan but there are 300 sensors. So let's build the sensors in Canada.

OBJ: Certainly I have seen lots of Ottawa companies and Canadian companies do semiconductor chip design. But I think you advocate that we need a little bit more hardware capacity. We have lots of design, so why do we need the hardware component?

GH: Manufacturing jobs. Each one of them brings two to seven service jobs associated with it. So it's great skills and great understanding of manufacturing that leads to better designs and better products. We're trying to develop the ecosystem and build out more of the smaller producers of electro-mechanical systems so that we can create new applications for mechanical sensors.

OBJ: What are the opportunities when it does come to hardware? Are you advocating that we build one within the next few years, for example?

GH: Well, no, what we're saying is these already exist and the trouble is there are some holes in the ecosystem. We would like to help them to grow faster and generate more business so that they can afford to do an expansion. It is expanding existing facilities. An example is the Canadian photonics fabrication centre in Ottawa, it's an office of the NRC. They have some very large customers and they're doing photonic devices. But the trouble, of course, is when a large customer comes in. They pay for the development of a photonic process and it becomes proprietary to them, so no one else can use it. So why don't we, CMC, go in and help them to develop a process, create the design interface for it and then bring in hundreds of small clients? As those clients grow, they will develop more volume and they'll go directly to the NRC and work out a proprietary process. Quebec is very keen on becoming the world centre for superconducting circuits. So we run training on superconducting fabrication and we have to have it built in the U.S. or in Europe right now. We'd like to repatriate all of that into Quebec. And silicon photonics is another area which is in incredible growth. It could easily be done in Canada. Each of these technologies don't require absolute state-of-the-art semiconductor gear there. They can use older equipment and that equipment can last for 10 years instead of two. We just need to invest in those niche technologies.

OBJ: I understand you have a proposal before the federal government to fund something like this. Is it in and awaiting some sort of decision or has funding been approved? Tell us about that.

GH: We're still talking to them about what that proposal entails. We're giving them more and more detail. They're asking us questions about how funds would flow, who would benefit from this, how it will benefit Canada and how we would measure success. So all of that is ongoing right now. I cannot tell at which point this would be approved or not, but there seems to be a lot of interest and it seems to push all the right buttons in terms of the current situation.

OBJ: When people in Ottawa's technology sector think there's not a lot of room for us to grow in terms of semiconductors, how would you reply to that?

GH: You've got to work harder. Harder and smarter.