OTTAWA — Semiconductor colossus Intel is in discussions with Canadian suppliers for some of the critical minerals it needs to meet accelerating chip demand, and it’s looking to the country’s research ecosystem for breakthroughs in AI and materials science. 

While the firm has no immediate plans to manufacture its tiny products on this side of the border, it’s building massive new facilities in the U.S. from which Canada could still benefit.

As Intel looks to balance its supply chains and production between North America, Europe and Asia, “we think there’s the potential for Canada to play a very key role,” said Allen Thompson, vice-president of U.S. government relations.  

The Santa Clara, Calif.-headquartered company made US$63.1 billion in revenue in 2022, employing 131,900 workers. Only about 800 of those employees are in Canada, including R&D and engineering teams as well as sales and marketing staff focused on the local market. But Intel’s interest—and interests—in the country are growing.

The firm has made several acquisitions here, including Recon Instruments, a Vancouver wearables startup it bought in June 2015. The semiconductor company’s venture arm has also invested in more than two dozen Canadian firms, including Untether AI, a Toronto-headquartered AI chip startup; Kitchener, Ont.-based RouteThis, a connectivity troubleshooting platform; and Montreal’s since-sold Element AI.

The firm is looking here for more innovation. Thompson sees an “untapped resource” in the country’s “very strong research infrastructure.” Last year, Intel Labs, the firm’s academic partnership unit, gave about $2 million in grants to Canadian universities. It’s collaborating, for example, with Montreal-based Mila and the University of Waterloo on AI applications. As manufacturing shifts, “R&D partnerships are going to become more and more important over time,” Thompson said.

Intel provides funding, internships for students to get industrial experience, and insight into applications for new technologies, said University of Toronto professor Vaughn Betz, who holds a research chair co-sponsored by the firm. “They are developing leading-edge semiconductor and 3D fabrication technology,” he said. “Information about what might be in those next generations is very useful.”

Betz’s work includes mapping deep-learning computation onto field-programmable gate array (FGPA) chips to make them more efficient, improving the hardware itself, and developing computer-aided design tools for both processes. While his lab has collaborated with Intel teams on several projects, “the research is not closely managed” by the company, he said.

Thompson cited opportunities for Canadian innovation partnerships in material science. For example, Intel will need to find substitutes for the PFAS chemicals it uses in its chip-manufacturing process as governments look to regulate them away due to environmental concerns. 

Intel is also looking to Canada to shore up the company’s supply chain, as it expands production capacity closer to home. It is “actively engaged” in discussions with Canadian critical-mineral miners and refiners, said Danielle Goodman, director of government affairs for Canada, citing growing semiconductor demand. The global market was worth some US$600 billion in 2021, and could grow to US$1 trillion by 2030, according to McKinsey’s projections. 

Producers need to diversify their sources of the critical minerals that go into all those chips, as other rare metal-dependent sectors like EV batteries also ramp up, said Thompson. Companies are also looking to new refiners, with most of the ore-refinishing currently concentrated in China. The federal government’s $3.8-billion critical minerals strategy, announced in the April 2022 budget, is “a very good start,” he said.

Semiconductor foundries are in reshoring mode, adding heavily government-subsidized new production capacity in North America and Europe to reduce reliance on geopolitically-precarious Asian sites. Intel is building two new fabrication plants—”fabs” in industry terms—in Ohio’s Licking County at a cost of more than US$20 billion. Toronto-based Brookfield Infrastructure is providing US$15 billion in financing for two more in Chandler, Ariz., with the firms committing to invest up to US$30 billion between them. 

Intel does not currently manufacture in Canada, and Thompson suggested that’s unlikely to change. “Semiconductor manufacturing incentives—particularly with the cost of fabs—[are] such a large component of the decision-making you use as to where to make those investments,” he said. The $52.7-billion U.S. CHIPS and Science Act, he noted, “helped spur some of the things we’re doing in the United States.”

Ottawa has so far pledged $250 million for the semiconductor sector; Washington’s incentives could be worth up to US$3 billion per fab. Still, Thompson says Canada could play a role in advanced packaging—an area of federal focus—or other parts of Intel’s supply chain. Goodman did not directly answer The Logic’s questions about whether the firm has sought federal funding, but noted that it had engaged with the government and is “looking for opportunities while we put all our efforts to rebalance and create a resilient global supply chain.”

Intel isn’t the only global semiconductor giant with a considerable Canadian presence—AMD, IBM, Marvell and Qualcomm all have R&D and other operations here. But while multinationals use the talent of Canadian hires to generate IP, the profits flow to their home countries, noted Hamid Arabzadeh, CEO of Ottawa-based Ranovus, which makes data-centre chips. “It’s almost like having labor … as a resource,” he said—a new iteration of Canada’s pigeonhole as a resource-based economy. He’s called for Ottawa to ensure more of the benefits of chip innovation stay in the country.

U of T researcher Betz is himself a former startup founder; he sold Toronto-based Right Track CAD to San Jose, Calif.-headquartered Altera in May 2000. “That became the core of [a] Toronto technology center, which [has] continued to grow to the present day,” he said. Intel in turn acquired Altera in June 2015. 

Betz said the company now has hundreds of engineers working on FPGA technology near U of T, and other multinationals have set up shops nearby. “They’re high-paid jobs that have a lot of influence, and they are incubators for future startups,” he said, noting that nascent firms like Untether and Tenstorrent have benefited from workers who know how to develop chips. “Funding excellent research has resulted in a lot of long-term, strong economic benefits.”