Why is it so difficult for Brazil's chip industry to get off the ground?

In June this year, the Brazilian Ministry of Science and Technology announced that the National Center for Advanced Electronics Technology in the southern city of Porto Alegre will enter bankruptcy liquidation procedures due to years of losses.

Brazil's semiconductor industry first emerged in the 1980s, when nearly 20 companies from different countries established offices or factories in Brazil. However, high inflation and complex taxation in Brazil at the time made it difficult for foreign companies to gain a foothold. By the 1990s, these companies had closed their Brazilian operations one after another, adopting a policy of manufacturing products in Asia and other places and exporting them to Brazil.

With the rise of the computer industry, the Brazilian government enacted new laws to try to attract the semiconductor industry back to Brazil. In 2008, the National Center for Advanced Electronic Technology came into being and was placed under the Ministry of Science and Technology of Brazil. According to official figures, from 2010 to 2018, the Brazilian government provided a total of 600 million reais (about 720 million RMB) in grants to the center. At its peak, the center had a total of 183 employees. Through self-development and introduction from abroad, it has mastered 6-inch wafer technology and can produce chips used in passports.

Since the National Advanced Electronic Technology Center is a state-owned institution, according to the instructions of the Brazilian government, researchers have carried out a lot of chip research and development work for health care, transportation and animal husbandry, but it has not been officially put into use. Marcos Dosa, secretary of the National Advanced Electronic Technology Center's trade union, complained: "All these projects were not implemented in the end, which resulted in the center's failure to generate economic benefits."

Despite receiving government funding every year, the National Center for Advanced Electronic Technology is still in a state of deficit, with a loss of 160 million reais (about 190 million yuan) during the same period. In recent years, the number of employees at the center has dropped to 48, but it is still difficult to maintain. As early as June 2020, under the personal chairmanship of Brazilian President Bolsonaro, a decision was passed to liquidate the center. According to an announcement from the Brazilian Ministry of Science and Technology, since some research and development projects are still in progress, the social agency responsible for corporate bankruptcy must ensure that the number of employees at the center is temporarily kept above 24 in exchange for a government subsidy of 20 million reais (24 million yuan) per year over the next four years.

The National Center for Advanced Electronic Technology is a product of Brazil's policy to revitalize the semiconductor industry. It was once known as the only company in South America with chip research and development and production capabilities. Today, its closure shows that Brazil's semiconductor industry policy has once again failed. Government-supported projects have failed, and private sector plans have not worked.

In 2012, IBM, together with Brazil's EBX and the Brazilian National Development Bank, announced a plan to build a chip foundry in Brazil, with a total investment of US$500 million, and IBM would invest in technology. Soon after, the project stalled due to the bankruptcy of EBX chairman Aike Batista. The Argentine company that subsequently took over EBX shares was also unable to turn the tide, and eventually had to watch the foundry go bankrupt due to financing difficulties.

In 2019, the total revenue of Brazil's semiconductor industry reached 550 million US dollars, which proves that the Brazilian market still has considerable potential. Industry insiders believe that Brazil may be able to find another way in the semiconductor field, such as focusing on fabless design companies. Haid Malconi, sales manager of Brazilian Chipus, believes that "Brazil has a sufficient reserve of semiconductor talent, and we are contributing in other ways."