MUNICH, Germany The birth of the Brazilian semiconductor industry has been protracted and difficult, but even as the infant takes its first steps, it is facing an uphill battle.
Critics see outdated technology, an unclear business model and a domestic market too small to create a competitive chip industry. And the training that Brazilian engineers need to approach industry best practices just serves to expose them to overseas opportunities. But against all odds, the Brazilian semiconductor industry is gaining momentum.
The finishing touches are being added to the semiconductor cleanroom of Ceitec, Brazil's first semiconductor front-end manufacturing line. Ceitec's activities are part of a huge effort by the Brazilian government to modernize the nation's economy. Since President Inacio Lula da Silva took office in 2003, the Brazilian government has consistently invested in information technology. Some $150 million has been invested in Ceitec (Excellence Center of Advanced Electronics Technology) in the southern city of Porto Alegre. And last December, the group licensed a 0.6-micron manufacturing technology from X-Fab Semiconductor Foundries AG (Erfurt, Germany).
"Our equipment can handle 0.35 micron, and in about three years, we will be able to move to 0.18 micron," said Ceitec president Sergio Dias.
The chips produced are intended to serve the local market, at least initially, and target automation, machinery and automotive industry applications. But while there is growing demand for consumer and commercial applications in the domestic Brazilian market, industry observers said the country won't be able to produce the chips required for these products for the foreseeable future.
Many are skeptical about Brazil's ability to find a place in the global chip economy in the near term. "There are a couple of caveats," said Alfonos Velosa, a research director for semiconductors with Gartner. "I am not going to say they won't succeed, but it will take time until they will become competitive on an international scale."
Brazil is trying to ramp up its capabilities, Velosa said, but the technology it uses is way behind the leading edge. "The facilities necessary to build state-of-the-art semiconductors are very expensive, and they require a complex infrastructure that is difficult to put on a greenfield site."
Others share the skepticism. Some doubt that Brazil will ever be able to compete on the manufacturing side with the Far East. Though Brazil is considered a low-wage country, "you always will find someone who does it for less money," said the Brazilian manager of a foreign semiconductor company, who requested anonymity. He also doubts that local demand is strong enough to justify a modern manufacturing line.
"To utilize a Brazilian manufacturing line, they would have to export at least 40 to 60 percent of their capacity," he said. This would be difficult because of adverse currency conditions and, even more so, because Brazil does not have the critical mass to benefit from economies of scale.
"Chip design is much more important than manufacturing. The innovation is in the design," said Thomas Hinderling, CEO of Centre Suisse d'Electronique et de Microelectronique (CSEM). Swiss-based CSEM operates an Innovation Center in Belo Horizonte, which, starting in 2009, will design MEMS and other semiconductors for automotive, aerospace and medical applications. "If you look 30 or 50 years into the future, you certainly won't find much semiconductor production in Europe, but you will still find chip design."
The same is true for Brazil, he said. The type of production Ceitec is planning will only make sense if the government erects tariff walls to protect the local market. "But this can only be a temporary measure; Brazil will have to open its trade," Hinderling said.
Hinderling is not alone in advocating that Brazil pursue design over manufacturing. Over the past two years, the Brazilian government has initiated and funded eight design centers across the nation. It plans to increase that number to 15. Eventually, all the state-supported design houses will become commercial companies--if they can attract enough trained experts.
Brazil's labor market for design engineers is another stumbling block in the way of its progress. While software engineers are readily available, the industry lacks semiconductor design and manufacturing experts. Ceitec, for instance, is estimated to have hired more than 50 percent of the country's specialist engineers. In the face of the engineering shortage, EDA software vendor Cadence Design Systems Inc. came to the aid of the Brazilian IC industry.
"The Brazilian chip industry faced a classic chicken-and-egg situation," said Cadence vice president Wendy Reeves Dunn. "However, they did not have the time to wait." Cadence decided to donate chip design software to universities and help them develop curricula. The target is to turn out 15,000 chip designers in three years.
It is not clear how this will play out for Brazil. Once graduated, many engineers prefer to leave the country to work abroad, where salaries are higher.