Critical minerals value chains – Semiconductors

Semiconductors are essential for a clean and digital economy. The development of semiconductors relies on the increased supply of responsibly sourced critical minerals, making this value chain a priority under the Canadian Critical Minerals Strategy.

Why are semiconductors important for Canada?

Semiconductors are essential for a clean and digital economy. The development of semiconductors relies on the increased supply of responsibly sourced critical minerals, making this value chain a priority under the Canadian Critical Minerals Strategy.

Why are semiconductors important for Canada?

Semiconductors are understood as the “brains” of electronics. They are needed to produce the microchips used in most electronic devices and are therefore crucial to the future success of Canadian industries. Canada uses semiconductors to improve:

• green energy systems
• zero-emission vehicles
• 5G/6G cellular technology
• artificial intelligence
• quantum computing
• modern Internet connectivity
• other emerging technologies

There is an ongoing global shortage of semiconductor chips that was worsened by the COVID-19 pandemic and other supply chain disruptions. The struggle to meet the current demand for a long-term chip supply is concerning, as the demand will only increase moving forward. This means that Canada’s semiconductor development and innovation are vital to the economy.

Canada has effective environmental, social and governance practices that support innovation in compound semiconductors and ensure materials used in their production are sourced responsibly. We also have expertise in the following areas:

• research and development (R&D)
• design
• specialized manufacturing
• advanced packaging techniques
• mineral exploration and geoscience

Understanding the semiconductor value chain

The global semiconductor value chain consists of three broad stages:

1. design
2. fabrication
3. assembly, testing and packaging (ATP)

High-purity critical minerals are required once the value chain reaches the fabrication stage.

Most semiconductors are made of a critical mineral called silicon, but compound semiconductors are slightly different. Compound semiconductors are made up of two or more elements and they can outperform silicon due to properties such as power, speed and durability. Antimony, gallium, germanium and indium are some of the primary critical minerals used to create compound semiconductors.

Some of the main challenges in the production of compound semiconductors are the cost of raw materials and the complexity of the fabrication process. The process can include up to 1,400 steps and require as many as 300 different material inputs, including high-purity critical minerals and specialty chemicals.

Global market snapshot

According to McKinsey & Company, semiconductor sales are projected to grow from US$600 billion in 2021 to US$1 trillion in 2030. The total annual growth rate is forecasted at 6 to 8% per year, with 70% of this growth coming from the automotive, computing and data storage, and wireless communications industries.

According to Yole Group, the greater compound semiconductor market was worth $64 billion in 2021 and is expected to grow to $100 billion in 2026. Demand for gallium, a mineral used in the second most common semiconductor, gallium arsenide, is projected to grow 10 times as much between 2020 and 2040.

The semiconductor industry operates in regional clusters. In Asia-Pacific, supply of raw materials is dominated by China, Russia and Tajikistan, while South Korea, Taiwan, Japan and China are leaders in fabrication and ATP. In North America, U.S. firms lead R&D and design activities, including intellectual property development and materials R&D. In the EU, countries like the Netherlands and Germany have developed specialized equipment such as extreme ultraviolet lithography machines to use during fabrication.

The Canadian advantage

Canada’s semiconductor industry is recognized for its strengths in R&D and design, as well as high-value niche manufacturing and advanced packaging capabilities. This includes a large network of research centres and university labs that support innovation projects up to the early commercialization stage.

Canada’s expertise in the field consists of:

• communications chips and devices
• display and imaging technologies
• sensors and microelectromechanical systems

Canada is a global leader in the compound semiconductor industry. The Canadian Photonics Fabrication Centre (CPFC), run by the National Research Council of Canada, is North America’s only end-to-end, pure-play, compound semiconductor foundry. The CPFC makes devices using different types of compound semiconductor materials, including indium phosphide, gallium arsenide and gallium nitride.

Canada’s mineral wealth creates opportunities to support the development and production of compound semiconductors. Canada produces both indium and germanium as by-products of zinc smelting. Canada currently produces 6% of the world’s indium. Canada also contains 4% of the world’s antimony reserves.

Canada’s value chain gaps and opportunities

Semiconductors are critical to the long-term economic competitiveness and national security of many countries. As the semiconductor demand grows, Canada can use various sources and collaborate with partners and stakeholders to explore the potential of its compound semiconductor critical minerals, including gaps in processing.

Currently, Canada only produces a small amount of the critical mineral inputs required for compound semiconductor manufacturing. Many of these critical minerals (e.g., gallium, germanium and indium) are recovered as by-products of other mining operations (e.g., zinc smelting), meaning production data is limited. There are also few entities that specialize in processing these critical minerals to the high-purity levels needed for semiconductor fabrication.

In Canada, gallium is currently only produced through recycling. It is recovered from devices containing gallium arsenide (like cellphones and laptops) and from the waste material generated during manufacturing processes. There are currently no primary producers of gallium in Canada, but there are a few advanced projects that can co-produce it.

We focus our efforts on applying specific compound semiconductor technologies to sectors where Canada and its allies have clear strengths and priorities, such as telecommunications, automotives, renewable energy, artificial intelligence, quantum computing and aerospace.