Brazil Starts a Chip Industry

In the coming decade, Brazil wants to be known for integrated circuits, not just Ipanema. The country hopes to produce silicon chips alongside soybeans. Its attempt to do so will begin in January, when production is completed on the first batch of locally designed and produced RFID chips at the government-run National Centre for Advanced Electronic Technology, known by its Portuguese acronym, Ceitec.

Working with X-Fab Semiconductor Foundries, based in Erfurt, Germany, Ceitec expects to have approximately one million chips ready for market next month. Dubbed the Chip do Boi ("bull chip"), the low-frequency (134.2-kilohertz) RFID series will be used in Brazil's cattle industry to track roaming livestock and gather data on the deforestation they cause in the country's vast Amazon region.

The chip has been tested over the past two years in the predominantly agricultural states of Mato Grosso do Sul and Minas Gerais. Ceitec forecasts a demand for the chip of 1.5 million units next year, with an expected growth of 10 percent or more for the next decade. The cow tracker is the first in a series of planned products that could include chips for digital TV and WiMax systems.

While the technology itself is not cutting edge, this is an important development in a country still highly dependent on exporting commodities, and where nearly all electronics are imported and exorbitantly expensive, says Kevin Suh, an executive familiar with the country's technology sector. Brazil imports all of its semiconductors—US $4.64 billion worth in 2010, according to a study for the Brazilian Development Bank (BNDES).

The push into semiconductors is part of a larger effort to diversify the Brazilian economy, something foreign investors are beginning to notice. Silicon Valley venture capital firms such as Redpoint Ventures and Accel Partners have made multiple investments in Brazilian Internet start-ups recently.

Suh, who is chief operating officer of HT Micron Semiconductors, a joint venture between South Korean semiconductor packager Hana Micron and Brazilian holding company Parit Participações, has closely followed the country's technology efforts. HT Micron currently focuses on packaging, but Suh says that "long-term plans are to become a complete semiconductor company."

Of Ceitec and the Chip do Boi, he says, "it's not a breakthrough innovation, but given the realities of the Brazilian government and its hopes of developing [a technology sector], it can be viewed as a breakthrough innovation." He also believes that looking for niche applications "is good strategy in the beginning" but that in the long term the chip industry will have to diversify.

Brazil began trying to foster a semiconductor industry in 2007 with several measures, such as the National Microelectronic Program, which offered semiconductor firms tax breaks and other incentives. But the effort was to little effect.

The government then created Ceitec in 2008 in Porto Alegre in the southern state of Rio Grande do Sul, home to Brazilian president Dilma Rousseff, who had a hand in choosing its location.

But the firm's development has been marred by manage­ment problems (the first CEO was ousted) and by Brazil's infamous government bureaucracy. What's worse, the original silicon-wafer processing equipment, donated by Motorola, was outdated: It was meant for 150-millimeter wafers instead of 200 or 300 mm. Replacing it was a laborious effort. And so the Chip do Boi was set back by over a year.

Ceitec is just one of several government initiatives intended to make Brazil more competitive in technology. Earlier this year the government created the Science Without Borders program, which will provide scholarships for 100 000 Brazilian science and engineering students to study and obtain additional degrees overseas. The government says it will fund 75 000 scholarships and the private sector will fund 25 000.

Another initiative, the government agency Financiadora de Estudos e Projetos (FINEP), provides seed-stage funding to Brazilian start-ups, as does the Fundo Criatec, which is run by BNDES. And these efforts are having some success.

The IC design start-up SiliconReef is one company receiving funding from Fundo Criatec. Founded by Marília Lima and Tiago Lins and incubated at the Recife Center for Advanced Studies and Systems, the company is developing a microchip to improve the efficiency of photovoltaic cells for cellphones and other portable devices. Lima says SiliconReef expects to start selling the chip in the United States and Asia by March 2012.

Whether the efforts of the Brazilian governmental succeed or not remains an open question. But it will likely need greater participation from the private sector, says Carlos Paz de Araujo, a winner of the IEEE Daniel E. Noble Award. The prolific Brazilian inventor and founder of memory-chip company Symetrix Corp., in Colorado Springs, says he has been trying to stimulate Brazilian semiconductor manufacturing since 2006. In particular, he says that the last few steps in manufacturing Symetrix's Trinion FeRAM chip, including adding the ferroelectric material, can be done in Brazil.

And while Symetrix is working with some semiconductor design houses in Brazil, Paz de Araujo says that he has had a hard time getting Brazilian government officials or Ceitec to understand the opportunities that technologies like FeRAM offer. He says that with some changes in mind‑set, "Brazil has an incredible chance to be state of the art."