Brazil's chip biz still stymied

Many Brazilians have European roots, which makes it easy for them to move to places where they can earn much more. "We love to travel to the USA for holidays, but for work we prefer Europe," said a Brazilian engineer.

Ray Bulger, CEO of Duolog Technologies Ltd. (Dublin, Ireland), sees it the same way. When he changed his company's business model from that of an intellectual-property licensor to an EDA software company, Bulger advertised globally to find experts in Eclipse and Java. He found them in Brazil. "In Ireland, salaries are three times higher than in their home country," he said.

Nevertheless, there is an established chip design business in Brazil. Besides the design houses launched by the government, North American and European companies maintain design centers there. Freescale, for example, designs microcontrollers for automotive and industry automation applications in a center near Campinas in the state of Sao Paulo.

There is expertise in the Brazilian consumer electronics realm that could benefit the chip industry. Brazil has modified the Japanese HDTV standard to create a national derivative, said Cadence's Dunn. "This makes a good opportunity to build chips for. They already have designed software and protocols," she said.

In addition, many cars in Brazil have a "Flex" motor that can burn gasoline as well as biofuel derived from sugar cane. This requires specific engine control electronics--a potential technology candidate for exports.

But Gartner's Velosa contended that a semiconductor industry requires a complex ecosystem, not just a few design houses and a single production line. Citing Advanced Micro Devices Inc. in Dresden, Germany, and the usual incentives granted by the Chinese government to international companies to settle in a desired location, Velosa said he doubts that Brazil has the resources or intention to compete on this scale.

In November 2007, the Brazilian government approved the Growth Acceleration Project, through which it allocated $3.5 billion for technology, science and innovation over three years. The Brazilian microelectronics industry will be one of many voices clamoring for a share of that money.

In January 2008, two companies reportedly announced investments in Brazil. One was Korean Brasemi, a back-end manufacturer of flash memory chips that reportedly will invest $32 million in a back-end line, according to newspaper Jornal de Minas. The Brasemi facility will be located in Vespasiano in the state of Minas Gerais, the newspaper said.

And in an interview with Computerworld do Brasil, U.S.-based Symetrix Corp. announced plans to build a factory for smart-card readers and smart-card chips. CEO Carlos Araujo said the company plans to produce chips equipped with a technology hitherto offered only in Japan.

When it comes to the Brazilian chip industry, one name emerges as regularly as the Loch Ness monster during the silly season: Companhia Brasileira de Semiconductores (CBS). This mysterious company, led by former Volkswagen do Brasil manager Wolfgang Sauer, is as tangible as the wind on Brazil's beaches, yet consistently makes it into the headlines.

According to reports in the Brazilian press in January, CBS was negotiating with Brazil's National Bank for Economic and Social Development to obtain $500 million to advance an ambitious project to produce chips for digital TV and telecommunications in Minas Gerais.

Even if some of these reports turn out to be idle talk, it appears that the Brazilian chip industry is in motion.

The industry is in such an early phase, though, that it is not clear which direction it is going to take and how it will position itself in a world market characterized by merciless competition. Some observers believe it is only a matter of time before Brazil will join the global semiconductor camp.

"The momentum is there. It is starting to take off," said Cadence's Dunn.