Semiconductor Showdown: Canada Enters the Chip Race

Speaker 1 [00:00:02] Hi, it’s John here. 2023 is already shaping up to be a critical year in the showdown over semiconductors, which are arguably the most important technology the world has seen in 50 years. They’re the size of your fingernail, and yet they power everything from your coffee machine to kitchen appliances to all those toys you might have seen at Christmas. They also effectively run the Internet through data centers and so much more. To state the obvious. Chips play a central role in the global economy, and we’re just getting going. We’re going to need a lot more chips in the coming years to run everything from electric vehicles to the Internet of Things in your home. And yet, as we’re seeing in the news every day, the factories that build them are largely located in one place, Taiwan. You know, the U.S. in the 1990 accounted for almost 40% of global chip manufacturing. And today that share hovers around 12%. The U.S. has started a kind of space race in the semiconductor world, but it will take more than a few months to change things. In fact, it took 30 years to move a lot of that production from the U.S. and Europe to East Asia. And it may take just as long to move it back. And while all this is going on, Canada is going to have to make some key decisions. Are we going to be a leader in the new supply chain of semiconductors? How can we fit into what the U.S. is doing through the massive CHIPS Act that is going to put hundreds of billions of dollars into semiconductor manufacturing and fabrication on U.S. soil? And what kind of innovative thinking can we bring to the next generation of semiconductors and chips? The question is not just where will chips be made in the decades ahead, but what kind of thinking and innovation is going to go into those tiny little things that power everything in our lives? This is Disruptors. An RBC podcast. I’m John Stackhouse. We’re recording this special episode of Disruptors live in Ottawa, where industry leaders, innovators and policymakers have gathered to figure out what role Canada can play in the semiconductor business of tomorrow. To get a hands on perspective, I’ll be joined later by Jim Keller. He’s the CEO of ten Storefront, a leading Canadian company that makes specialized chips for air applications. The first, I’m joined by Benjamin Bergin Benz, the president of the Council of Canadian Innovators. That’s a group that was set up by Jim Balsillie and John Ruffolo to champion Canadian innovation and all the entrepreneurs who are trying to disrupt everything around us. He’s also the coauthor of a thought provoking op ed that ran recently in The Globe and Mail called The U.S. is seizing the moment on chips and semiconductors. Why can’t Canada? Ben, welcome to Disruptors.

Speaker 2 [00:02:56] Thanks so much, John, for having me.

Speaker 1 [00:02:58] So, Ben, the U.S. is seizing the moment on chips and semiconductors. Why can’t Canada?

Speaker 2 [00:03:03] That’s a great question. And I’m actually currently in Ottawa engaging with the federal government from a civil servant, but also a political side. And I think Canada actually can seize the moment. And so there’s this sort of, you know, cautious optimism that is kind of abound with me right now. And I think why we need to seize the moment is maybe the important piece. You know, this isn’t something where Canada has had capacity in a long time. And I think that’s a number of reasons. I think it’s the way that supply chains were created. I think it’s the way that the geopolitics existed in the eighties, nineties and 2000. But what has happened has been a dramatic transformation in the circumstances in which we find ourselves, where there is obviously concerns about what’s happening in Russia and Ukraine. There’s concerns about what’s happening in China and Taiwan, but also how that plays out with places like Japan and South Korea. And so the markets and capacity that actually produces semiconductors is being upended. And in this moment, in this crisis, there is an opportunity. And I really think that this is an opportunity Canada must seize on, because there is a tremendous amount of value that we can generate as a country for this. There’s an environmental component, right? Building ships that are more energy efficient will help us meet some of our targets in terms of clean technology and things like Paris Agreement, but also defense. And I think that this week has really demonstrated that with, you know, balloons floating across the ocean and us, do we have the capabilities to take them down? And semiconductors are a fundamental component of the economy. They will actually fuel all other areas in the innovation economy. And what I mean by that is that when we look at how we’re going to generate a I like catchy beat that requires a tremendous amount of semiconductor capacity, but also a tremendous amount of energy.

Speaker 1 [00:05:04] And I really want to come back to that energy question because I don’t think many people appreciate what the era of chat chips, amongst other emerging technologies is going to do to energy demand literally at our fingertips. But let me start first with the CHIPS Act. We’ve been talking a lot, including on this podcast about the Inflation Reduction Act and probably overlooking its twin, which is equally important, and that’s the Chips and Science Act, which puts $280 billion on the table to in many ways reshore a lot of chip manufacturing, boost American competitiveness, innovation, national security. How on earth does Canada keep pace with that?

Speaker 2 [00:05:45] The first step is we’ve got to get organized. We’ve got to figure out what do we have in terms of actual capability and actual capacity in this country. And that’s going to sound like a bit of a cop out of an answer. But here’s the thing. The federal government and provincial governments are actually spending hundreds of millions of dollars in semiconductors, whether that be through research and development or whether that be through other grants and other programs. Let’s take a country like the Netherlands, which has had a real cohesive policy and has made themselves indispensable in the supply chain of semiconductors, so much so that the Americans had to actually go to the Netherlands and back, beg them not to give the technology to China. Here is a small country, you know, smaller than Ontario, having the capacity to be able to say we have real strength in the supply chain. So what we need is a bit of coordination from government. And what we need is thinking about, you know, not right now, but ten years from now, where is let’s use a clean analogy, the puck going and how do we get there? How do we make some bets? And so the piece here is not that we need to match it dollar for dollar, but what we need to do is think about it in a smart way, about where the real value is in the supply chain.

Speaker 1 [00:07:00] When I think of what Canada’s superpowers, if I can call them, that might be in the space. Certainly post-secondary education is one of them. We have centers like Toronto, what’s grown out of the University of Toronto that are equivalent to any of the great brain centers in the world? Is it not enough to simply develop the talent and let them loose to to pursue ideas? Or do we need to take a more directional approach to this?

Speaker 2 [00:07:28] So on the talent piece of allowing it to flourish? God, no. This actually requires strategic thinking from people thinking about how and where we want to go. The idea of allowing it to just sort of be this organic structure is not going to lead to any actual outcomes. Look at any of the other countries. They have had a strong centralized government which has pulled forward areas where they can be successful. So places like South Korea focused on imaging chips. That is why Samsung is a titan and a giant and you cannot compete with them. If you look at what Japan has done, they have focused on another area. If you look at the Netherlands, it’s another area. So allowing sort of a thousand flowers to bloom is not the right answer here. And if we want to take a more Canadian example of why this policy doesn’t work, I suggest we look at the federal government’s A.I. strategy, which was similar in that node, John, where yes, we’ve got amazing people like Geoffrey Hinton and folks like Yoshio Bengio. And we thought, Let’s just give them money to build talent. Well, fast forward five years from then when that was first struck, we see that 80% of the intellectual property generated out of places like Vector have gone to large foreign multinationals like Microsoft. And so not only have we helped subsidize the R&D of foreign multinationals, but we have shut ourselves out of the future of fundamental intellectual property. And so my real concern here is that if we do that same thing in semiconductors, we’re going to find ourselves in the same situation. So to your point, John, yeah, we’ve got some really smart people. We’ve got some amazing academics. But if we don’t go from IP generation to IP retention to corporation building, we’re going to find ourselves or as the century continues to move forward.

Speaker 1 [00:09:25] You suggest. Ben, we’ve got to start with an inventory. Figure out what we have. So beyond the inventory, what do we need to do in the coming months?

Speaker 2 [00:09:33] So we are we’re already doing it to some extent, which is the good part. Industry is beginning to call us. And so the meetings we had in Ottawa were that congealing of the ecosystem. And so we brought together 15 really amazing semiconductor companies that are headquartered here in Canada. We’ve had outreach to close to 40. And we’re going to begin to pull together a document and a list of things that we need to begin building on. And it’ll have timelines. It will have a structure to it. And government has committed to participating in this discourse. And so the next step really is to figure out, sure, champions for our supporters and how do we move this forward. And I think one of the things that needs to really be communicated to Ottawa in this strategy is foreign multinationals will have to be somewhat involved in this discourse, but they cannot be at the center of it. So if, let’s say Minister Champagne or Minister Freeland goes out and announces, you know, $500 million in the budget to a foreign multinational to build a plant here, that should be considered an utter failure. What really needs to be focused on is how do you support these domestic firms to figure out where they can play in the supply chain and then give them all of the tools that they need in order to succeed? Because that’s actually how we’re going to build industrial policy in this country.

Speaker 1 [00:10:55] But don’t you need those multinationals, a lot of them American companies actively involved in building up the Canadian ecosystem, just as we’ve seen with automotive over the decades? I think of Intel and, you know, the plant it’s trying to build in Ohio. Some estimates say it’s going to be 60 to $100 billion to develop that one plant. Well, it’s hard to imagine a Canadian company doing that. So why not bring intel in or any other company, for that matter, to be Tesla and have them working actively with your members, with Canadian entrepreneurs to build up that cross-border supply chain that we’ve seen fairly successful over the decades and in other sectors?

Speaker 2 [00:11:40] So I would say ish. John Right. I mean, you’re talking about the auto sector, which was the tangible economy, not the intangible, where it was about the actual building of things, and it was really less about the intellectual property that went into it. And so my critique or argument is that the reality we are in is very different. This is about data. This is about IP ownership and all that basically doing in terms of bringing in a large foreign multinational to, let’s say, build a stop here will lead to low wage jobs in the semiconductor ecosystem. It is us playing for kind of bottom of the barrel.

Speaker 1 [00:12:21] Then we could talk about all sorts of aspects of chips, but one that I do want to focus on that you mentioned off the top is energy efficiency, the way that things are going with Chad GPT. But that’s just one example. It’s going to create a new generation and demand a new generation of chips that are energy hogs on a level that we’ve not seen before. How does Canada help? Not just Canada through that, but the world? As we shift to much more advanced technologies, much more energy intensive technologies? Surely there’s a role there for Canada to to bridge?

Speaker 2 [00:12:58] Yeah, no, look, I think that that’s a great question. And I’m not going to sit here and say I’ve got a fully baked up plan, but I’ll maybe throw a couple of trial balloons into the air because balloons are obviously the name of the game right now these days. One in this inventory that we’re going to do as a country, we’re going to find that there are some companies here that are making chips that are energy efficient. So one company that was at the table, zany, they make ships that are about 25% more energy efficient, but they also have higher capacity because of the way that they’re structured. So looking at what are opportunities in terms of energy efficient within our own ships industry, I think will be really, really critical. And how do we support them? How do we actually create those opportunities? So ultimately, it’s this kind of strategic thinking about it from various complex areas is how we, I think, to arrive at that energy component and I think is, you know, truly our responsibility as Canadians.

Speaker 1 [00:13:57] Then you’ve laid down a gantlet for the country. I want to wrap up with some inspiration that you draw from your members when you’re with these incredible companies that many people may not have heard of. What inspires you? What are they doing that we can all get behind?

Speaker 2 [00:14:14] So hopefully the way I’ve kind of communicated, but this hasn’t been Debbie Downer. I’m actually super excited about all of this and hopefully you can kind of share it in the center of my voice and that excites. It comes from the CEOs and the leaders in this space that I engage with. These are wildly smart people. These are wildly ambitious people. These are people who have decided to stay in Canada. And it’s their sort of continued dedication and excitement that fuels me. And when you hear about the things that they are building and their ability to see into the future of where we are going, not only as a country but as a planet, you get both a sense of urgency, but also a sense of how can we help shape it?

Speaker 1 [00:14:56] Then you both challenged us and inspired us. Thanks for being on disruptors.

Speaker 2 [00:15:00] Thank you so much for having me.

Speaker 1 [00:15:04] That was Benjamin Bergen, president of the Council of Canadian Innovators. Stay with us. In just a moment, I’ll be joined by a global leader in semiconductors to get his take on Canada’s opportunity.

Speaker 3 [00:15:20] You’re listening to Disruptors, an RBC podcast. I’m Theresa Do. I’d like to share with you our latest report from RBC Economics and thought Leadership called the next Green Revolution: How Canada can Produce more Food and Fewer Emissions. Global food demand is set to soar as the population rises to 9.7 billion people in 2050. Meanwhile, climate change is slowing the agricultural productivity of many major producers. And geopolitical upheaval from Russia’s invasion of Ukraine has destabilized the world’s food systems. Rarely has speed in the world presented such a daunting challenge. So how can Canada lead the world’s great effort to confront it? To find out, visit RBC Rt.com slash next Green Revolution.

Speaker 1 [00:16:13] Welcome back. Today, we’re talking about the race to secure a homegrown supply of semiconductors. Canada used to be a leader. And while that may not be the case today, there’s all sorts of promising prospects out there, including ten store, which is based in Toronto. It’s my pleasure now to introduce the CEO of ten Story, Jim Keller. Jim, welcome to Disruptors.

Speaker 2 [00:16:33] Thanks for having me.

Speaker 1 [00:16:34] Jim, I want to start with your own background. You’re a well-known name in the semiconductor business. You’ve got an extensive career in processor design, worked on Tesla’s fully self-driving Chip, Apple’s A5 processors and served as senior vice president at Intel for several years. Take us into the ten storied story. How did you first come across the company?

Speaker 2 [00:16:55] So the founder is Ljubisa Bajic, and he worked for me at AMD. I was working at Tesla at the time and I was his angel investor, so I gave him the first check that he and a couple of guys did the classic, you know, two years in a garage making that work. I stayed in touch. So we had a lot of conversations about, you know, the direction they’re pursuing, how their engine work, what they thought was great about it. But I wanted to get back in the start startup. And then rather than start an air company, I joined Canstar to work with the media because I thought his approach to it, his team were doing something especially good.

Speaker 1 [00:17:30] What are the biggest challenges that you’re up against a ton store?

Speaker 2 [00:17:33] The biggest challenges is the fundamental, you know, how do you build an air compiler and how do you build the hardware that works properly? It’s complicated for for some unknown reasons, and then that’s complicated for some novel reasons. The scale of the data that they want to process on is just immense. And then that data, you know, if it was a nice big chunks that you could process through, that would be great. But now it’s spread all over the place.

Speaker 1 [00:17:56] And we’ve got chips in pretty much every aspect of our life from the coffee maker that gets us going in the morning to the vehicle that moves us around and way beyond that. The sorts of applications that Tenstorrent is perhaps looking towards. I’m guessing are going to be at the more sophisticated end of the spectrum.

Speaker 2 [00:18:15] Well, in the short run, we’re targeting developers who want to write software and get faster and around, especially if they’re building novel models. We want to start aiming at smaller data centers where people own their own applications and they want to co-develop with us. But going forward, I computations going to end up with everything servers, and it’s going to be in phones, it’s going to be in game machines, like you name it, it’s going to be all over the place. It’s going to be ubiquitous. But to get to that point, you know, we need a lot of development.

Speaker 1 [00:18:44] Does it matter where the development takes place? There’s a lot of debate about onshoring these days.

Speaker 2 [00:18:51] Nothing is co-located in this world. And so the supply chain is so diverse. It’s just amazing. And you can say anything you want about where stuff comes from that comes from everywhere. When I was at Tesla, we had really good supply maps where parts came from, which half the countries in the world and you know, the distance parts move. It’s it’s really remarkable.

Speaker 1 [00:19:11] Is that going to continue?

Speaker 2 [00:19:12] Probably. There are centers all over the place. What you tend to see is the high end development aggregates. You know, Boston and Silicon Valley were big centers. Toronto is an unusual class because University of Toronto has produced many, many of the top AI researchers, compute researchers. And then I had was a great graphics company center in Toronto. Altera is an FPGA company in Toronto. Intel and a couple other people had HPC programmers there that built high end machines, so that core Tens torrent software team was this interesting mix of AI research, HPC, FPGA and graphics programmers, which actually was it was fairly novel to have such a diverse software set but all different kinds of high performance problems. So you so you see you need critical mass to get going, but rather the software development, the hardware development and the sourcing and supply chain are very different things and they’re spread all over the place.

Speaker 1 [00:20:10] What does a country like Canada need to do to keep that advantage and more importantly, build on it?

Speaker 2 [00:20:15] Well, it’s interesting. You know, our team is very diverse and Canada opened their arms to people from Eastern Europe, from the Middle East, from India. And so that to build up a big technical pool. But the reason they went there to start was University of Toronto. And way back, if you remember Nortel, there was quite a number of tech companies in the networking space that established. And so you see this kind of multi-generational thing happen, like that technology wave that was big and one generation kind of built the infrastructure that the next generation took over. The Prime is an interesting place, the big metropolitan city. And you know, because of their policies, they attracted like say, an outsized percentage of people looking for a good place to go live and do development work.

Speaker 1 [00:21:03] One of the challenges with Canada’s air strategy has been commercialization of a lot of the ideas coming out of places like U of T, And there’s some concern that Canadian businesses aren’t doing enough to tap into that in the air ship world. Does that matter a whole lot or are you just selling to and developing for ambitious companies wherever they may be?

Speaker 2 [00:21:26] There’s two answers to this. One is, are you funding the fundamental research capabilities and startup funding so things can get going? That’s separate from picking winners. So you say, well, we need the pixel winners. Well, good luck with that. The marketplace 100 people start to finish helping the supply side. There’s good research institutions. There’s good support for students who want to study at their support for startups or who want to get going. Canada’s support tends to aren’t really well. I know they’ve assisted us in hiring people. They’ve funded universities which source great students. They create an environment where a whole bunch of people want to be. On the whole, we’re pretty happy with our Canada work.

Speaker 1 [00:22:09] When you see very significant investments like the CHIPS Act in the US, is it a game changer or is that just more kind of politics around the sector?

Speaker 2 [00:22:20] My my guess is it’s a good thing to have a national policy when they start spending large amounts of money. What happens is the companies who have a lot of money and have the ability to lobby for it will get a lot of that money. So there’s never been a revolution in tech or giving money to existing players, did they? There’s no example of it. So having a policy that says, you know, we have the right policy is about immigration, that the right policy is about import export, the right policy about taxation, that that creates the playing field. But, you know, way back when, you know, lots of people were giving IBM money to develop PCs, they contracted out to Microsoft. Right. The start up and so on that one.

Speaker 1 [00:23:01] So is that going to be the same in chips as anticipated?

Speaker 2 [00:23:04] Well, it’s always complicated because the money goes to the big companies and they hire people and try and do stuff and then they get frustrated and they go quit and they start a company and, you know, who knows the pedigree.

Speaker 1 [00:23:17] And you’ve made the point that one of the best investments country and a government can make is in the education system, especially post-secondary education.

Speaker 2 [00:23:25] I’m a fan of people who go to college and are so excited about work and they quit a semester early and they want to go do a hands on stuff and coding and all that. You know, speech patterns are good for some people, but they’re a waste of time for a lot of people. So it’s hard to say how that works out.

Speaker 1 [00:23:39] Jim, as we move towards close, I want to get your thoughts on the geography of the chips world, because that’s in some ways what’s sparked this episode and the debate about reshoring, semiconductors. If you can think out five or ten years, do you think the chips landscape is going to be fundamentally different now?

Speaker 2 [00:23:58] It’s really complicated because there are so many kinds of technology. You know, I talked to a few people about, you know, we need to bring, you know, chips back home so we can manufacture stuff. And I was thinking, are you trying to make more refrigerators or are you trying to make iPhones? Because those are really different technologies. Like, even in a server you look inside or it’s a power supply or power transistors, there’s all different kinds of technology. So you have to think hard about what you’re trying to impact. So I think, you know, the recent, you know, political stuff and funding stuff has made people think hard about it. But I think that’s what a lot of people took away from. This is like diversity of supply chain and actually knowing where your stuff comes from. Yeah, I think that’s going to be really important. Getting it all in the same place, that’s going to be possible. Our supply chain is already global, international, diverse, and that’s partly because there’s there is way more different pieces of technology in everything we do than you think. Even if you buy one chip, there is a thousand companies behind that chip. And so how are you going to bring 2000 companies onshore?

Speaker 1 [00:25:03] Jim, I wonder if you can leave our listeners with a sense of where you think chips will take us. Go out five, ten years. What will be the big differences?

Speaker 2 [00:25:11] Well, first, you know, in the big data centers and stuff today, it’s like 5 to 10% of the compute that’s going to go to 8090. So that’s a really big change. And whether that’s five years or ten years, it’s hard to say. But directionally, it’s going to happen. There are so many pieces of software you interact with today that are so clunky and painful to use, and there’s going to be a big wave of start ups building all kinds of user experience software that’s actually better. Now, whether it stays better, that’s another question and we’ll see what happens. You’ve already seen the stuff that like the ability to create imagery, the ability to create language, to build it, use it to assist in writing. That’s going to be become pervasive now, just like, you know, there was a point when you finally knew a lot of people who used a word processor to write stuff. Pretty soon you’re going to know a lot of people use A.I. to write. You know, it’s one of those technologies. There’s no going back.

Speaker 1 [00:26:04] Jim, thanks for being on disruptors.

Speaker 2 [00:26:05] Great to talk to you. Thanks.

Speaker 1 [00:26:08] That was Jim Keller of Tenstorrent. I’d also like to thank Ben Bergin, president of the Council of Canadian Innovators, who joined us in the first half. As we’ve heard, semiconductors affect every facet of our lives, and they’re going to play an even greater role in the future. A large majority of them are made far away in a place whose future is, at best uncertain. Building domestic manufacturing facilities may be difficult and it may be expensive, but it’s clearly a race. Canada can’t afford to sit out. We need to make our mark. And today we talk to people building the industry in the hopes of doing just that, putting Canada again on the semiconductor map. Join us next time for a special live on location episode at the C 100 Summit in Half Moon Bay, California. I’ll be in Silicon Valley getting the Canadian perspective on the tech sector’s new reality. Until then, I’m John Stackhouse and this is Disruptors, an RBC podcast. Talk to you soon.

Speaker 3 [00:27:10] Disruptors, an RBC Podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. It’s produced and recorded by JAR Audio. For more disruptors content, like or subscribe wherever you get your podcasts and visit RBC dot com slash disruptors.

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