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Making the case for a homegrown Canadian semiconductor industry (financialpost.com)
101 points by Teever 15 days ago | hide | past | favorite | 99 comments



This touches a problem democracy inherited from the market participants it tries to emulate in the west nowadays.

Longterm commitment to plans.

It makes no sense to support projects short term, only then to hand the developed fruits of labour over to those capable to longterm commit to development. This is also the most valuable trait a government can bring to the market, as it is a system usually optimized for exploring local optima, but incapable to traverse the ridges of the research landscape by itself to new "hunting grounds".

In germany, a semi-conductor industry was existing and was given up, as further development would have needed propping up by government. Solar was developed and then fed to the wulfes locally, as entrenched energy providers sabotaged the support the young industry would have needed against chinas cheap manufacturing. And this pattern has played itself out over and over in western markets.

Shortsighted entrenched interests sabotage "new Players" who venture to those capable to commit.

So even, if at this moment, all parties agree to commitment, how longterm will this commitment be. Why should someone migrate from Taiwan to Canada, only to participate in a re-enactment of a short term "desert-flowering" of a chip industry?

Nobody would try to make a career on such shifting grounds. You cant built a cathedral on sand.


There is no conflict between democracies and accomplishing long term goals. Common perceptions are skewed because (1) "everything works as expected" and (2) "obviously clever long term plan bears fruit" make boring headlines.

If the democracies ever bring out the brass knuckles and try hard they'll probably succeed. Even mild tweaks like loosening IP protections and letting failed financial institutions go bankrupt once in a while would do wonders.

But the political will is focused on, eg, the Green movement (and Germany is one of the world-wide leaders there) which sees it as essential to our survival that we replace cheap energy with clean energy. Now I'm sure a lot of readers believe in that as a goal but industry would rather go where the cheap energy is.

The English speaking democracies have spent years deprioritising industrial reform in favour of improving welfare and supporting environmental initiatives at the expense of industrial competition. These are widely supported policies and fair enough, it is great to live in the west. But the long term effect of this is easy to anticipate - challengers will find it easier to compete.


Solar energy (with storage!) is cheap energy.

We aren't quite at the storage tipping point, but there is good reason to believe we will get there.

Solar as generation tipped years ago.

Make plans like energy in 2030 will be cheaper than it is now, not more expensive.


This is simply not true right now. It will be, I hope sooner than later, but not right now.


However longterm planning can be very rigid, in the GDR (east Germany) they used to joke that 'we have got the biggest microchips in the world' (old joke from the eighties, from the same domain, actually)


Germany chose cheap solar over homegrown solar. It is not clear to me that German solar could have become as cheap as Chinese solar with the old subsidy scheme.


There's also the subsidies provided by CCP central planners to consider. This subsidizes consumption in their target markets.

I appreciate the strategic concerns. However, the obvious benefit of a foreign nation subsidizing your consumption shouldn't be overlooked. Some of the knee-jerk reactions to central planning suggest that the western nations should emulate the CCP's statist system.

To be sure there are pragmatic concerns, but more concerning is the race to the bottom of top down planning this creates. Government bureaus will always find a rationale to expand purview of the state.

Specifically, if photovoltaic solar isn't cost effective without subsidies, then why use it?

When the state chooses winners and losers, it distorts the incentive based progression of technology. By narrowly focusing on artificially profitable PV solar, more efficient innovations may be overlooked.

There's always an unseen cost when central planners misallocate resources away from profitable industries. Pragmatists' best case might be that strategic concerns outweigh the losses of productivity and employment.


The problem is that you never know where better optima lie. You have to guess.

It is easiest when a new optimum is easy to reach by just following the gradient. Short-term thinking works well here.

There may be some optima much farther down, which take a lot of "buried" investment to reach: efficient photovoltaics, electric cars, reusable space launch systems, maybe even fusion power. We know that some of them are better optima than the previous state, because they have been reached. Some, like fusion power, haven't been, but there is a lot of hope that they'll work. Some other attempts, like supersonic passenger aircraft, ended up not as optimal as their proponents had hoped. You never know.

The problem is that you can only reach these distant goals by concentrating resources and spending them without an apparent commercial result for years and decades. This takes a high concentration of resources and a commitment. Currently only billionaires and certain national governments can afford that. Most public companies are too beholden to their quarterly results to follow long-term policies which do not bring steady profits along the way, and many governments are in the same situation because the voters do not care about long-term goals enough.


Canada has a long and shameful history of our innovations being screwed up or screwed over. In the 50s our fighter/interceptor was leagues better than the US's jets, but crooked politicians killed the project. In the 70s our CANDU reactors were safer and cheaper to run than the PWRs the Americans were exporting, somehow we lost out on that too. More recently Bombardier built some of the nicest small passenger jets, and now that's owned by foreign companies.

The brain drain is endless. If this project took off, our leaders would roll over in a second to sell it off, it's the proud tradition here.


Excellent article on the Avro Arrow:

The project was genuinely ground-breaking. Avro’s engineers had been allowed to build a record-breaker without compromise. But Canadians would soon discover that the supersonic age had made aviation projects so expensive that only a handful of countries could carry them out – and Canada, unfortunately, wasn’t one of them.

https://www.bbc.com/future/article/20200615-the-record-break...


The Avro was a supersonic bomber interceptor that was going to be ready in the 1960's. It was good at one thing and one thing only (allegedly, it never flew at speed even close to the spec).

It was made to counter a hypothetical supersonic bomber that the soviets never built. Sputnik made them obsolete!


Amy Shira Teitel, a Canadian spaceflight historian and author of Fighting for Space: Two Pilots and Their Historic Battle for Female Spaceflight. “But Canada is obsessed with Canadiana, and the Arrow was revolutionary. It was a Mach 2 jet on par with the United States


I don’t understand the case exactly. Is it that there’s room to innovate (like WeavAir, the startup they feature early in the article) or that there’s unmet demand (what the article references with COVID semiconductor shortages)? Certainly innovations can create markets on their own but I don’t see a temporary shortage as being some kind of opportunity to break into the industry. What would they do - build fabs? And if so why would they be able to do that any faster than others? Where will Canada get all the talent something like that requires, not to mention the capital? The article later focuses on winning niche portions of the semiconductor market - which may be feasible if they innovate ahead of others. But it’s easy to wish for that and hard to realize it, especially given all the barriers to business in Canada (tax policies etc).


Yeah what's not evident to me is how Canada has the upper hand in this? If it can be done in Canada, it can be done in the US (and pay better)


Well we produce enough high quality graduates from our colleges and many would would love nothing else but to stay and apply their trade where they have built up connections but at present that connection does not outweigh the massive drag that is our housing crisis & tax policy.

Even if one wished to settle in Vancouver for example, one would still be better off working down south for 5-10 years to save up for a nice house or apartment but by then all your friends are down there so you may as well stay.


Canada needs to focus on retaining the tech capacity that it has.

https://financialpost.com/news/economy/virtual-brain-drain-p...


I hate to bang on about it, but as a Canadian who has worked in the U.S. and who is now in the U.K., I've tried hard to land a good position in Canada. Very few opportunities seem to exist, and the ones that do pay a pittance. In my experience, it is not 30% higher in the U.S. as the link indicates, but more like 100-200%. A couple of years ago, I was offered a highly technical position with a salary below what I had been paid 15 years prior. It was not really even going to cover the basic cost of living for my family.

All I can say is, if you own a company in Canada, you need to work on interesting problems and pay well. Then, you will have your pick of top quality talent. If you are having trouble getting staff, you probably need to about double your salaries.


(might not add much) But this has been my experience as well. People like to point out that CAD has better social support than US - fine, a paycut may balance out there. But that's nowwhere near the differential I get here in the UK _plus_ the social support here has been far superior to CAD.

I interview with CAD companies from time to time and make a point of stating salary/equity requirements on par with the leading global market. Once they match, I'll be back.


I've been told C$120-150k is the salary top end quite a few times. Base salaries don't seem to go much higher. Meanwhile I'm trying to find alternatives to contracting for the US


USA-ian in Canada. Same experience here.

120k is about as high as I've seen, unless you're an oil exec or a hockey player.

By comparison my middle-of-the-road IT guy salary was 140k USD (like 180k CAD), and the high-end coder pay has no comparison (save for those exec or hockey types).

Meanwhile as a Canadian you probably speak N. American English, and have a strongly similar cultural background to the US -- easy to integrate -- have access to good, cheap University education, and have access to the NAFTA TN visa, which gets you across the border quickly. Is it really a surprise?


For anecdata sake: Recently been interviewing in Toronto, Calgary and Vancouver, 6yoe fullstack dev. Highest I saw was 120k, lowest 85k.

The worst part is how little stock companies are willing to give out. I had one company offer 6k over 4 years, which really puzzled me. Had another company try to sell me on how amazing their 30k/4 years package was (on a lower salary).


Even that level is extremely rare and generally only offered by the US-based giants.


Seconded. Unless someone has family or is stuck up here for some reason, it's not worth it.

Nobody is serious about being competitive, it's all about trying to keep trudging along with whatever people are stuck here. All the talk about investing in tech and so on is just hot air.


Lower pay, higher taxes, exorbitant rents, less choice, less excellence - what's there not to like?


Yeah Canadian salaries are a joke compared to their American counterparts. Their tech companies need to offer much more competitive salaries if they want a remote chance of preventing further brain drain of their talent to the US.


Why are salaries so low in Canada? The difference for most technical and engineering jobs is huge.

It would make sense if the cost of living were lower but it isn’t. Rents and home prices are very high. Tech jobs in lower cost of living places in the US like Kentucky or Michigan often pay much higher than Canadian tech jobs.


* Canada only has 38 million people; California alone has 40 mil. It's a large country in terms of space, but not in terms of people. That limits how many domestic customers you can get, and internationally you're fighting with US / EU / Asian firms that can marshal a lot of resources.

* Hard emphasis and lobbying by oil and resource extraction groups to continue the focus on resource extraction -- aka "the resource curse" https://en.wikipedia.org/wiki/Resource_curse

* Higher taxes. Why pay you 150k when the gum'mnt (fed + provincial) is just gonna take 57%? Might as well just pay you 90k and then throw bennies or a company car. Also means that the money that the consumer would spend is now going to government use.


They're low in Europe too. The first thing I can think of is that American tech companies are generally much bigger than their Canadian and European counterparts, and therefore have much larger resources financially to pay competitive salaries.

On top of that, the American tech industry has a huge number of both existing companies and new startups entering the picture due to the entrepreneurial culture and VC funding infrastructure.

As a result, the job market in the US is more competitive for talent, whereas Canadian applicants have fewer companies to choose from if they don't want to leave the country, and therefore less leverage for salary.


Yet cost of living in the major cities is so high!


LOL I interviewed for Delvinia, and their offer was tremendously under market. Good riddance.


No wonder Asking Canadians surveys were such a pain when I did them.


https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iroikDYIT5Q...

Canada's deficit is among the worst of all relevant countries at the moment.


Here is Europe:

https://www.ons.gov.uk/chartimage?uri=/economy/governmentpub...

The EU average is about the same as Canada at 13.7% of GDP. The UK is up at 19.2%. If anything, I would think that Canada's 2020 deficit is pretty typical of developed countries.


Which countries are irrelevant?

By the way, your graph only shows the data for Canada. I guess the rest of the countries are irrelevant?


https://en.m.wikipedia.org/wiki/List_of_countries_by_current...

Per capita, our debt is comparable to the US


Yes but Canada cannot afford that much of debt because our dollar is not a global reserve currency with a massive standing army.


How does an army prop up a currency?


A currency’s value is the trust that you will be able to exchange it in the future for something you want.

An army can help that by signaling the stability of the country. An army alone does not do the job though, the real value lies in the trust and organization of the society itself. The more of that there is, the more others will believe the currency will be able to buy something they want, since organized societies with high trust are able to produce desirable things.

A secondary concern an army helps with is enforcing laws and preventing fraud, such as counterfeiting. If you know the US is not going to let some other tribe or country counterfeit their country, and has the capability to stop them, it helps you trust the currency more.

Obviously, the armed forces aren’t directly involved in the first few layers of conflict, but it’s always advantageous to have the ability to park an aircraft carrier fleet off someone’s coast during negotiations.


Anytime there is an economic conflict with certain countries the US will perform "carrier fleet exercises" in their seas.

https://www.cfr.org/backgrounder/sea-power-us-navy-and-forei...

We (USA) are totally the child of Britain. And we will probably be slowly phased out of relevance in a similar way.


By destroying any country that dares to oppose petrodollar (latest example being Libya).

Edit: Google “libya petrodollar gold”


I don’t get it.


The largest producer (Saudi Arabia and other OPEC members) of crude will only accept USD for payment. In exchange the US guarantees security. You may read the inverse of the security guarantee as well. Producers defying the arrangement may expect regime change or other hostilities.

>However, by 1971, convertibility into gold was no longer viable as America's gold resources drained away. Instead, the dollar became a pure fiat currency (decoupled from any physical store of value), until the Petrodollar Agreement was concluded by President Richard Nixon and Secretary of State Henry Kissinger in 1973.

The essence of the deal was that the U.S. would agree to military sales and defence of Saudi Arabia in return for all oil trade being denominated in U.S. Dollars. A secondary option to this agreement is the purchase of U.S. debt securities with surplus oil proceeds. By 1975, all OPEC nations agreed to price their oil supplies exclusively in U.S. Dollars and to hold their oil proceeds in U.S. government debt securities.

https://www.sandstoneam.com/insight/rise-of-the-petrodollar https://en.wikipedia.org/wiki/Petrodollar_recycling#Petrodol...



The graph is for the growth of debt to GDP - we previously had lower debt and so the need to react to COVID caused the debt to grow by quite a bit as CERB was implemented to try and keep people liquid. I can't find any break downs of 2020 in terms of actual debt to GDP, but the chart supplied definitely isn't telling the whole story.


The public deficit is the surplus of the private sector (1).

Without that deficit you would have or a fall in GDP or an increase in private debt (that it's a lot worst than public debt).

(1) https://www.youtube.com/watch?v=WS9nP-BKa3M

(Stony Brook University, Presidential Lecture Series: Stephanie Kelton)


There's no reason Canada shouldn't have more fabs. It has Teledyne DALSA, making mostly imagers and some MEMS parts. Canada has a bigger population than Taiwan, after all.


Yes there is one very important reason which is that Canada has zero semiconductor manufacturing expertise or legacy. Who is going to design, manage, and operate the plants? And who are the customers going to be?


Well, how did Taiwan start? At the time, they would have been competing directly with the US. The US had to possess every advantage: money, skilled labor, all your customers in the same country. Why did all the fabs uproot and move across an ocean?


How did Taiwan get its start... well, people there invented the foundry business model 30 years ago when barriers to entry in semiconductor manufacturing where much much lower than they are today. China has sunk hundreds of billions into the industry and is barely making a dent.


Well, Canada does manufacture other types of chips, there’s a huge case of brain drain to the US, we just need the government to incentivize Canadians who work in tech to stay in Canada


The minimum scale for a fab these days is thousands of employees... so it’s not a simple matter of keeping a few years of college grads in the country.


It's a commodity business. Buy somebody's used 32nm fab and ship it to Canada if you want a toy to play with . .


Did ATI ever have fabs in Canada?


Lol no.


Remember the C-Series plane?

Trudeau did absolutely nothing for the industry and immediately bowed down to Trump after he slapped tariffs later judged to be illegal. Well, not exactly, there was whining and a vague threat to switch an order of fighter jets from Boeing to Lockheed. Couldn't inject a little bit of capital at the right time. Airbus swooped in and bought the whole thing at a heavy discount.

Engineering shipped to France and manufacturing to Alabama.

And now Canadians expects a big investment in semi-conductor for highly experimental fabs?


Canada is basically just an economic extension to the US. I find it funny when people talk about us developing our own industry for X. We don't do that. Our approach is to be a pool of specialized and culturally similar people for the US to use as cheaper labor (when the loonie is low).


I think it's even more degrading than that. Canada basically exports healthy, educated, wealthy people to the US for little in return (well, other than being best friends with the world superpower anyway).

As long as there's favorable compensation and tax policies on the US side, Canada's brightest, healthiest, and wealthiest will just hop over to benefit from the more favorable conditions there after reaping the expensive taxpayer funded social benefits (healthy upbringing, affordable higher education).


> Canada's brightest, healthiest, and wealthiest will just hop over to benefit from the more favorable conditions there after reaping the expensive taxpayer funded social benefits

I see this repeated often on the web, but I hate this saying. I work in engineering. I'm surrounded by bright individuals, both fresh and experienced. Saying the brightest people leave Canada implies only the dumb and at most the mediocre remain in Canada, which I find not only offensive, but also not matching the reality.


Most of the Canadians I worked with in the US have gone back to Canada.

Our Principle Engineer at my last gig did like ~10 years around the DC area and then pissed off back to Calgary to raise kids and settle down. Still works remotely for the said US gig.

Plus have you ever been through a winter where it dips to -40C? Fuck that noise. I'm from the south and live in Canada and never though I'd miss bitter VA winters...


> Plus have you ever been through a winter where it dips to -40C?

Yes. I live in Calgary.


We do have it good with chinooks, let's be fair.


True, we are not Edmonton.


There are certainly bright people who remain in Canada, but they usually have clear reasons that convince them to stay rather than double their salaries.


Again, you are presenting (In Canada AND Bright) as a rarity, something very unusual to see in reality. This is offensive to the many many bright people in this country and it does not match the reality.


So long as we aren't talking hard stats, I don't see how one statement is incongruent or not. Companies found in places like e.g. Kitchener, Ontario because they believe there are bright people, 100%. They are still not willing to pay them Silicon Valley salaries overall (exceptions exist)


> Canada's brightest, healthiest, and wealthiest will just hop over to benefit from the more favorable conditions there after reaping the expensive taxpayer funded social benefits

The bulk of Canadian taxes are paid by the "brightest, healthiest and wealthiest" [0], so the expensive social benefits Canadians enjoy are largely funded by extracting taxes from these people, not the other way around.

Thus, I can hardly blame them for moving to a place where they don't have to subsidize others as much.

[0] https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=111000...


Nice argument, but when you look at the data, it doesn't make sense.

According to your link, the top 10% of Canadians pay about 50% of the taxes in Canada. In the US, the top 10% pay a larger share: 70% (although this is only federal data).[1]

So moving to the US to avoid subsidizing others is probably not the best rationale.

[1] https://taxfoundation.org/summary-of-the-latest-federal-inco...


A 90th percentile Canadian in BC would make ~$100k and pay 25.37% to taxes.

A 90th percentile American in Washington right across the boarder would make $125k and pay 24.53% to taxes.


While true, it has no relevance to my comment. And it's a bit silly to compare with a state with no state income tax. Why not compare with NY, CA or OR?


Because it's the state right next to Canada with a major tech hub.

We can compare NY to Quebec where at $125k/$100k respectively Quebec has a slight tax advantage (33.65%NY vs 32.70%QC) that goes back in favor of NY with +$20k (34.48%NY vs 35.43%QC).

Ontario fares better though. Maybe that's the cause of the US rust belt.

Nevermind that if you're 90th percentile of California or NY, you'd be making near $300k. So your tax rate might be 10% higher, but your take home is easily triple of what you'd have if you stayed in Canada.


As of Jan 1, 2022, WA will take 1% of W2 (employee) income for taxes. 0.4% for family leave insurance/sick leave insurance and 0.6% for long term disability insurance. It’s income tax in everything but name.


Does Canada claw any of that back through expat income taxes?

That would seem to be a more realistic and mutually beneficial economic arrangement than expecting people to ignore an opportunity to make substantially more lifetime income out of allegiance to their birth country. We stole one in Ohio, she even married into the family. Her parents are absolutely amazing folks, just saw them on their way back from wintering in Florida (where they were actually able to get vaccinated, unlike back home where nobody is vaccinated and the cops are facetiming neighbors to make sure there are no visitors.)

Maybe Canada can stabilize as an incubator for cool people and recoup those expenses through the impact they have on the world.


> Does Canada claw any of that back through expat income taxes?

The US is the only country anyone cares about that taxes their expats.


Maybe we're on to something there.


By 'we', do you mean the US?

It's generally considered one of the worst aspects of the American tax system.

See eg https://en.wikipedia.org/wiki/Accidental_American#Taxation_o...


Yeah is a PITA if you're overseas.

Regarding the US and Canada, there are NAFTA cross-border tax rules which are complex and annoying, but not especially onerous in terms of tax obligations.


Most overseas American don't pay American income taxes either, because of minimum thresholds and widespread (anti) double taxation agreements.

Those people still have the hassle of having to declare American taxes, without generating any revenue for the fisc. That's a pure deadweight loss, if there ever was one.


It's true and sad.


Canada used to count Avro and Bombardier in their aerospace industry. We used to have Nortel and blackberry as leaders in telecommunications. We can have our own industry for X and we can be competitive world leaders in it.


You have (present tense) Shopify.


You’re not wrong, but this actually illustrates why we need to establish industry to counteract this problem. What you’re describing will always be true if we don’t have the initiative to correct it.

This stuff seriously concerns me because apart from natural resources, we have very little to leverage. I worry for my kids and their kids. Canada is in a very precarious economic and political position from my perspective.


Canada has lots and lots of fresh water. And global warming will open lots of farm land.

Could easily see Canada become the agricultural leader of North America.


Did you know that the northeast of the United States was once quite agriculturally productive? The current situation is the result of economics and will benefit long before Canada does and to a much greater extent.


> Could easily see Canada become the agricultural leader of North America.

The agricultural leaders of <anything> are countries that are nearly universally dirt-poor.


The Dutch disagree.

(Not just now, but also historically.)


Except that the Netherlands aren't rich because of their agriculture. They're rich and happend to be good at agriculture on the side as an added bonus.


Sounds like we are moving the goalposts now?

In any case, have a look at https://eh.net/encyclopedia/the-dutch-economy-in-the-golden-...

Agriculture has been important for the Dutch for a long, long time.

See also https://en.wikipedia.org/wiki/British_Agricultural_Revolutio... which arguably allowed Britain to become the wealthiest place on the planet for a while.


Ok, my mistake.


Then there's California, arguably North America's current agricultural leader.


California isn't rich because of agriculture. It's a rich state that happens to do some agriculture.


Illinois is 100% agriculture. All the tech from Schaumburg and Naperville (W. Chicago) has been hollowed out. It's still relatively rich as a state ... You are forgetting that until recently in Brazil the USA had double the agricultural productivity of any place else on Earth...


Chicago GDP = $619B IL GDP = $897B

Agriculture is a small fraction of what IL produces.


> You’re not wrong, but this actually illustrates why we need to establish industry to counteract this problem.

Who is we?


Sorry - we is Canada in this case. I didn’t make that clear.

So much of Canadian tax payer money has been poured into Bombardier. What could Trudeau do when Boeing had won the case in a US court against Bombardier, which allowed Airbus to swoop in?


> when Boeing had won the case in a US court against Bombardier

They didn't win https://www.cbc.ca/news/business/bombardier-boeing-tariffs-1...


> Trudeau did absolutely nothing for the industry and immediately bowed down to Trump after he slapped tariffs later judged to be illegal.

(a) The amount of money funnelled into Bomardier was a lot, and BBD was/is IMHO not much more than a personal piggy back for the founding family who still runs thing. The two-class shares are crazy and should have been eliminated in any one of multiple bailouts that the company received over the years/decades.

(b) Canada has put retaliatory tariffs on all sorts of products when the US has acted in a silly fashion (and not just under Trump): it doesn't do much because of the relative sizes of the two countries.


So the FP is taking a break from partisan hackery to do a puff-piece to drum up some investment?


The article didn't even mentioned ATI or Matrox?




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