Canada Invests Millions to Build Chip Network as US Races Ahead

(Bloomberg) — Canada will invest C$120 million ($88.2 million) over five years to build a national chip network, as calls intensify for the government to do more to bolster its lagging semiconductor sector.

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Industry Minister François-Philippe Champagne announced the outlay from the federal Strategic Innovation Fund on Thursday. The investment supports a C$220 million project led by the nonprofit research accelerator CMC Microsystems to help Canadian startups commercialize new technologies.

Called the Fabrication of Integrated Components for the Internet’s Edge (Fabric) network, the program will subsidize the production of prototypes and give participants cheaper access to tools, software and training, The Logic first reported. Fabric also offers funding of up to C$10 million for hardware development in semiconductors, superconductors, smart sensors and photonics.

“Support for Fabric secures Canada’s future in semiconductors and advanced manufacturing,” CMC President Gordon Harling said in a statement.

The new funding follows the April announcement of a joint C$187 million investment by IBM and the governments of Canada and Quebec to expand IBM Canada’s chip packaging facility in Bromont, about 50 miles east of Montreal.

While some are heralding a renaissance in Canada’s chip sector, others say Prime Minister Justin Trudeau’s government has not done enough to keep up with global competition, particularly in the wake of the US Chips Act in 2022. The law set aside $39 billion in direct grants, plus loans and loan guarantees worth $75 billion, to incentivize American semiconductor production.

Trudeau’s government has, in contrast, promised billions in subsidies to match incentives in the US Inflation Reduction Act to lure global auto manufacturers to build electric-vehicle batteries in Canada.

Paul Slaby, director of Canada’s Semiconductor Council, recently complained that Canada lacks an industrial strategy for the chip sector. Speaking at the International Economic Forum of the Americas conference in Montreal in June, Slaby said the Trudeau government only lately started building a dedicated team for the industry. He suggested Canada seek to establish itself in international trade by controlling one niche piece of the supply chain, as the Netherlands has done with its photolithography machine producer ASML Holding NV.

Since the announcement of the Chips Act, more than 50 semiconductor projects have been undertaken in the US. Competition between the US and China offers an opportunity to align with American interests, Slaby proposed. “We need a semiconductor pact with the US,” he said.