Canada's tech industry is grappling with complex challenges as it heavily relies on foreign semiconductor manufacturing, primarily from Taiwan, which accounts for 60% of the world's semiconductor fabrication. This reliance places Canadian companies in a precarious position as they navigate the competitive global market. The high costs and lengthy production processes discourage domestic manufacturing, prompting firms to turn to nations like Taiwan, South Korea, China, and Japan for their manufacturing needs.
Ranovus, a prominent Canadian company known for its advanced silicon chips powering AI systems, is at the forefront of this industry conundrum. Hamid Arabzadeh, the company's CEO, advocates for keeping proprietary knowledge and intellectual property within Canada. He expresses concerns about the potential transfer of critical know-how to international competitors if manufacturing rights are outsourced.
“The best thing for Canada would be to buy Canadian stuff,” – Hamid Arabzadeh
The Canadian government has yet to impose tariffs on foreign components, creating an uneven playing field for domestic companies. FTEX, another key player in the power hardware sector, manufactures its systems in Malaysia using Taiwanese components. Ramee Mossa, FTEX's CEO, considers possible tariffs a "minor inconvenience" for his business but acknowledges that significant tariffs would be necessary to make Canadian manufacturing competitive in comparison to Chinese counterparts.
“We’re seeing their prices kind of stay steady and we’re seeing our prices go up, and at the end of the day, it gives us less room to maneuver.” – Ramee Mossa
The intricacies of semiconductor production add further complications. The process of engraving and transforming silicon wafers into chips is highly sensitive; even a speck of dust can disrupt it. Despite these challenges, Ranovus and other Canadian companies are already producing components that integrate into products from global giants like Nvidia and AMD.
“It can take several months to engrave and transform silicon wafers into chips and the process can be upended by as little as a speck of dust.” – Ramee Mossa
Arabzadeh finds it difficult to entertain the idea of overhauling business models to grant manufacturing rights to customers in exchange for royalties. He believes that Canada should prioritize fending off tariff impacts and focus on long-term strategies by investing inwardly.
“And it’s just the consumer that’s going to suffer in the end,” – Hamid Arabzadeh
The prospect of increased tariffs could compel companies like FTEX to raise prices if forced to manufacture domestically, placing them at a disadvantage compared to cheaper Chinese alternatives. This could inevitably affect consumers, particularly in markets such as e-bikes, where prices range from $1,500 for basic models to $10,000 for high-end versions.
“For hardware startups, it’s going to make it more difficult for us to raise (money) and it’s going to make it more difficult for companies that make hardware to survive,” – Ramee Mossa
Building semiconductor factories in Canada requires lengthy timelines that may not provide timely solutions. Avinash Persaud highlights the importance of policy clarity for facilitating investment and forming long-term partnerships.
“When you have clarity around that, it makes investment, foreign direct investment partnerships, long-term strategies much more likely,” – Avinash Persaud
“It’s very difficult to do that when somebody’s not sure what the policy is going to be.” – Avinash Persaud
