The supply chain squeeze on semiconductors continues to make news in the wake of snarls caused by the COVID pandemic. U.S. House Speaker Nancy Pelosi’s recent visit to Taiwan reminded companies of all sizes that the global supply chain for semiconductor chips is fragile.
Now a committee of Canadian MPs is seeking budget approval to make a trip to Taiwan in the fall that would aim to improve the Canada-Taiwan trade relationship, despite fears it could antagonize China further.
More background: Pelosi is the highest-level member of the U.S. government to visit Taiwan in 25 years. According to an opinion piece by Pelosi, her “visit is part of our broader trip to the Pacific — including Singapore, Malaysia, South Korea and Japan — focused on mutual security, economic partnership and democratic governance.” Beijing considers Taiwan a part of its territory, and says it has no right to conduct foreign relations independently. As Taiwanese officials welcomed Pelosi, China’s military responded by sending out missiles, warships and warplanes into the seas and skies around Taiwan.
Supply fears creeping back: In addition to the drills, Beijing blocked imports of fruit, fish and other foods from Taiwan after Pelosi arrived on the island. Currently, the Taiwan Semiconductor Manufacturing Company (TSMC) is producing 53 per cent of the world’s chips and Taiwan-based companies produce another 10 per cent. Fortunately, China did not disrupt the flow of semiconductors or other parts, but the tension is a reminder of the supply’s vulnerability.
Where can you find semiconductors? The real question is, where can’t you find semiconductors? When people are talking about semiconductors today, they usually mean semiconductor chips, which can be found in smartphones, hospital equipment, vehicles, computers, fighter jets and much more.
Why should Canada care? Although Canada is home to offices for many global semiconductor leaders like TSMC, Samsung Electronics, AMD, Qualcomm and Intel, their “Canadian footprints are limited when compared to their headquarters elsewhere,” said Melissa Chee, president and CEO of ventureLAB, a leading technology hub for hardware and semiconductor founders located in Markham, Ont.
Without being a dominant player in the semiconductor ecosystem, Canada runs the risk of relying on Taiwan for semiconductor supply. This can be a major issue when faced with a pandemic, wars and trade blockades.
Chee, who is a member of the Canadian Semiconductor Council, said that to be globally competitive in the semiconductor industry, “Canada needs to signal significant investments into its domestic sector across the full supply chain. We need to have a strong domestic industry that includes startups, multinationals, and investors to create an ecosystem that both keeps Canadian companies here and attracts global industry leaders.”
Next steps? If the committee of Canadian MPs gets the green light to visit Taiwan, Chee hopes the visit will spark a discussion on whether or not opportunities exist for TSMC to expand its semiconductor design and manufacturing capacity in Canada.
A critical partnership
Taiwan is not the only country Canada is looking to do more business with. A visit from German Chancellor Olaf Scholz this week resulted in multiple agreements between the two countries.
The federal government signed two new memoranda of understanding with Volkswagen and Mercedes-Benz that will see the German auto manufacturers secure access to Canadian raw materials for electric vehicle batteries.
Quick fact: China produces most of the world’s mineral-rich components for battery cells, including 70 per cent of cathodes, which can account for half the cost of a manufactured cell.
The Volkswagen agreement will focus on sustainable battery manufacturing, cathode active material production and critical mineral supply, while the Mercedes-Benz deal will focus on enhancing collaboration with Canadian companies along the electric vehicle and battery supply chains.
The agreements come during a significant shift towards cleantech energy solutions like electrification, wind, solar and nuclear. To keep up with this pace, production of many critical minerals and metals will need to increase by nearly 500 per cent over the next 20-30 years. There is the added concern that heavily depending on China for these minerals may create supply backlogs.
“We have everything it takes,” said Jayson Myers, CEO of advanced manufacturing organization NGen, who attended a meeting with Trudeau and Scholz in Toronto. “Canada has a democratic government that respects the environment, a strong mining sector and technology in AI and quantum computing that can be applied to battery manufacturing in EVs.”
Challenges ahead: Gary Agnew knows how difficult it is for mining companies to “target and quantify economically viable deposits, especially with most near-surface deposits having been already discovered.” There is the added difficulty of extracting and processing the minerals quickly and with minimal environmental impact, often in remote areas with tough weather.
As co-founder and CEO of Ideon Technologies, his company is leveraging cosmic-ray muography to provide visibility up to a kilometre beneath the earth’s surface, much like an X-ray or an MRI. The technology allows mining companies to identify anomalies such as mineral and metal deposits. It can reduce the amount of drilling, which means less expense and less emissions.
“Even though there are still many questions about the practicalities of implementation, what we are seeing is two of the world’s largest and most established auto manufacturers turning to Canada to help develop a solution for the world’s transition to clean energy. However it rolls out, this can only be good for Canada, for the automotive, mining and tech industry, and for the consumer at the end of the day.”
Deals on deals on deals: The production and supply of critical minerals is not the only thing Germany and Canada agreed on this week. With the ongoing war in Ukraine, many European countries are trying to distance themselves from Russia and its fuel supplies. That’s why the Canadian and German governments signed a deal to co-operate on exporting hydrogen fuel to Europe, targeting 2025 to begin shipments from Eastern Canada.
What are the experts saying? “It’s one thing to say you are going to do it, but it’s another thing to actually do it,” said Brandon Moffatt, co-founder of StormFisher Hydrogen, a London-based company that is producing zero-carbon gasses, including hydrogen.
Moffatt said lots of determining factors in this deal need to be figured out, including pricing and our ability to get the product out of the country and across the Atlantic.
In other news:
● Spun out of a University of Toronto lab in 2006, Vive Crop Protection has secured $34 million in a Series C investment round. The company, which has developed a technology that allows for the precise delivery of insecticide and fungicide, will use the funds to deploy its products into new North American markets and also for R&D.
● An all-in-one business management solution for fitness and wellness operators, WellnessLiving has deeper pockets after securing $86 million. With financial investment from McCarthy Capital and CIBC Innovation Banking, the company will allocate the new funds toward international expansion and product development.
● An emerging company in the 3D printing space, Metafold 3D has caught the eye of Vancouver-based cleantech investor Active Impact Investments. The business has attracted $500,000 in pre-seed funding. Metafold plans to use the capital to grow its team, develop its platform, and support its beta launch.
● Canada’s artificial intelligence (AI) cluster Scale AI is investing $17.2 million across 12 projects dedicated to scaling the adoption of AI in supply chains. D-Wave Systems, Mimik, Moov AI, Coveo, and Canada Drives are just some companies that will receive funding.
Amanda Whalen writes about technology for MaRS. Torstar, the parent company of the Toronto Star, has partnered with MaRS to highlight innovation in Canadian companies.