OTTAWA — The federal government is providing $120 million for a program to produce more semiconductor startups and new advanced technologies as Canada tries to build its chip base, The Logic has learned.  

Innovation Minister François-Philippe Champagne will announce the five-year award from the Strategic Innovation Fund (SIF) for CMC Microsystems at an event in Montreal on Thursday morning. The not-for-profit helps researchers commercialize hardware they develop and firms bring products to the prototype stage. 

Participants in the CMC-led $223-million Fabric program will get cheaper access to development software and tools, as well as training on how to use them. They will also work with the organization’s 40-person technical staff. 

Once the researchers and firms have created their designs and specifications, CMC will subsidize and bundle together their prototype production runs at partner fabrication facilities to make them more affordable; manufacturers typically have minimum purchase orders that start in the tens of thousands of dollars. 

Startups will come out of the program with prototypes they can show to private investors to raise funding, or to customers to secure orders, said CMC CEO Gordon Harling.  

In addition to these supports, Harling said the program will fund projects of up to $10 million each to develop new technologies in hardware fields like semiconductors; superconductors, which carry energy more efficiently; micro-electromechanical sensors used for measurement; and light-based photonics. Harling said selected companies will receive up to 50 per cent of their costs, while academic labs can be fully underwritten.

An advisory council will select projects to back. The SIF award’s project envelope includes $30 million conditional on matching provincial funding. Harling said CMC has been in discussions with Alberta, British Columbia, Nova Scotia, Ontario and Quebec about participating. 

Canada is one of several countries seeking to establish domestic strength in chips and other critical technologies, and to reshore their supply chains amid rising geopolitical tensions and demand for the components in industries from AI to automotive. 

The U.S. is subsidizing several new fabs for advanced semiconductors via the US$52.7-billion CHIPS and Science Act. The Liberal government wants to integrate Canadian firms and facilities in those supply chains, and has so far allocated $250 million from the SIF. Innovation Minister François-Philippe Champagne has touted a northeastern chip corridor which would encompass several R&D and manufacturing facilities.

In April, Ottawa announced $59.9 million from the SIF for IBM to expand its semiconductor packaging plant in Bromont, Que., and develop new technologies with a local lab. The fund previously awarded $36 million to Ranovus, an Ottawa-based photonics scale-up.

The Fabric program, which CMC first proposed in August 2021, plays into Canada’s broader chip push, and the cross-border integration of the field. Harling said CMC sends about a quarter of clients’ bundled manufacturing orders to GlobalFoundries, a firm headquartered in Malta, N.Y., that’s expanding with CHIPS Act money. Last year, that amounted to about 90 designs. Under their arrangement, CMC makes a margin on each transaction, with GlobalFoundries eventually taking customers on directly when they reach US$10 million in annual orders.

The federal funding arrives at a crucial time for the organization, originally established in December 1983 as the Canadian Microelectronics Corporation. The Canada Foundation for Innovation’s backing for a major CMC program ended last fiscal year, and the organization has faced financial difficulties, according to tech industry sources to whom The Logic granted anonymity because they were not authorized to speak publicly. 

Harling acknowledged cash flow was constrained, due in part to a longer-than-expected timeline for the federal Innovation Department to close the SIF deal. It’s not the first time: in November 2018, Harling notified staff CMC would have to close as the Natural Sciences and Engineering Research Council of Canada declined to renew its funding. 

But Harling said the new program and other initiatives will help the organization avoid any more close calls. Beyond the funding and fees, CMC will be able to resell any process innovations and technology it helps create. “In five years time, I would like CMC to be self-sustaining, so I don’t have to lay everybody off at the end of Fabric,” Harling said. He cited growing commercial revenues. CMC’s annual reports show it earned $7.6 million from user fees, consulting and other non-government sources in the 2022–23 fiscal year, up from $3.4 million in 2018–19.

The organization has also been building out its international business. It recently set up a U.S. subsidiary, which has started with training courses on design tools for academic institutions and other clients in New York. Harling said it’s also in discussions with universities and firms in Australia, Brazil and Mexico. International customers will receive similar services to the ones Ottawa’s SIF award is subsidizing, but pay full rates.