Microsystems offer way forward to global success if inherent advantages exploited

ITAC/SMC Symposium

Canada's microsystems and microelectronics companies have an opportunity to succeed in niche markets but they require effective government regulations and assistance to turn inherent advantages into market success. That key message was delivered at the annual symposium of the Strategic Microelectronics Council (SMC), a division of the Information Technology Association of Canada (ITAC).

Held October 16th in Ottawa in conjunction with CMC Microsystems, the event heard from several industry leaders who painted a cautiously optimistic picture of the small yet vibrant sector which is adjusting to trends such as an unprecedented merger of technologies and ongoing miniaturization of components that pose challenges to Canada's core companies and their supply chains.

The emergence of advanced manufacturing, printable electronics and nanotechnology is rapidly transforming the global environment for microsystems and Canada must act quickly to ensure a significant piece of the action.

Yet more ephemeral trends such as social media are currently attracting the majority of attention and financing, leaving Canadian companies in a difficult situation.

"We are at war … In the current environment, semiconductor companies are not getting financed anywhere now. Social apps don't build wealth, products do," says Antoine Paquin, a serial entrepreneur and current president and CEO of Solantro Semiconductor Corp, an Ottawa-based fabless semiconductor firm. "We have to out-innovate with imagination, guts and appetite for risk — overcome at the regulatory, policy and financial levels and go after greenfield opportunities."

Paquin says it wasn't that long ago when Canadian firms locally manufactured, designed and integrated their own semiconductor devices and chips. But those activities were offshored to lower cost jurisdictions — an evolution that coincided with the demise of several key companies.

Over the past two decades, major players such as Nortel Networks Corp, JDS Uniphase, Newbridge Networks and Gandalf Technologies have either died or been acquired by foreign entities. More recently, the difficulties faced by Research in Motion Ltd could lead to a further hollowing out of the domestic high-tech sector.

On the research front, the Canadian environment is somewhat more robust. The activities of CMC Microsystems and new facilities such as the Univ of Sherbrooke-administered MiQro Innovation Collaborative Centre (C2Mi) are helping firms penetrate domestic and global markets by assisting in the design, testing and prototyping of their products.

CMC's primary role is the administrator of a National Design Network, a pan Canadian network of facilities used by researchers to design and prototype complex microsystems. C2Mi is a large R&D facility that allows industrial and academic researchers to collaborate in the packaging and testing of complex microsystems and micro electromechanical systems (MEMS). Together they form the backbone of R&D support to assist firms in remaining competitive and on the leading edge.

Dalsa is a semiconductor component provider in C2Mi that generated 2012 revenue of $2.1 billion. Along with IBM, it is a major player in C2Mi, which was established in 2009 with $178 million in grants from the federal and Quebec governments.

Dalsa CEO Brian Doody says C2Mi is the world's most advanced MEMS/wafer level packaging facility, allowing his firm to transform intellectual property into commercializable technology. He adds that Canada has a more flexible operating environment than the US and — a reduction in R&D tax credits aside — strong government support at all levels.

Those advantages are countered by threats such as:

* low critical mass;

* government procurement regulations that are "self defeating for high-tech firms";

* insufficient deployment of information and communications technologies to enhance productivity;

* reductions in allowable expenditures under the Scientific Research and Experimental Development (SRED) tax credit program; and,

* undervalued public companies (see Adam Chowaniec column, January 20/12).

To survive in such a climate, Doody says "collaboration is key." He also calls on the government to "correct the derailment of the SRED program" to staunch the flow of R&D to other jurisdictions.

Dr Ian McWalter, president and CED of CMC Microsystems, says an advanced manufacturing renaissance is emerging and Canada needs to be part of it. To that end, CMC plans to put together a network and apply for funding from the Business-Led Networks of Centres of Excellence program.

"We need to make use of our significant infrastructure to open up new value-add. It needs to be scaled up," says McWalter.

R$