After struggling to get its semiconductor industry off the ground for the last several years, Brazil finally may have found its place in the market with the development of IC design services, memory modules and packaging.
Brazil exists well under the radar when it comes to semiconductors. But with little or no fanfare, the nation over the years has been trying to build fabs, assemble chips and develop a fabless IC design industry. Brazil has seen some modest success here, but it also has experienced several setbacks, including the collapse of a Brazilian-based foundry venture with IBM several years ago, and the recent closure of CEITEC, a government-backed chip organization. NXP also recently shuttered its IC design operations in Brazil. As the world’s sixth most populous nation, with more than 212 million people, Brazil began to get serious about developing its domestic IC industry in the 2000s. At the time, the country emerged as a sizeable market for cell phones, PCs and other products. In response, several companies set up manufacturing plants to produce these products in Brazil. Fig. 1: Map of Brazil. Source: CDC Also at that time, manufacturing companies in Brazil imported all of their chips from foreign suppliers, creating a huge trade gap. During that period, there were no fabs in Brazil. And so, because of Brazil’s high import duties, the illegal practice of smuggling chips began to run rampant in the nation. To solve these and other problems, the Brazilian government in 2002 initiated an effort to develop its domestic semiconductor industry. The goal was to build fabs and develop a fabless design industry, and the nation planned to educate a new crop of engineers to support those efforts. Today, Brazil boasts a large consumer market for PCs, smartphones and other products, but its semiconductor plans have fallen short. In total, Brazil’s chip revenues represented a mere 3.2% of the worldwide market in 2020, according to ABISEMI, a semiconductor organization spearheading the development of Brazil’s IC industry. In addition, Brazil has yet to build a front-end fab. The nation consists of several IC design companies, but not as many as previously planned. Simply put, Brazil’s semiconductor efforts have suffered from a lack of capital, hands-off government policies, and other factors. But it’s not all doom and gloom. Brazil has given up the notion of building fabs for now, but it continues to pursue several markets that require less capital, namely IC design, memory modules, and packaging. In fact, Brazil is moving from commodity to more advanced forms of packaging with efforts in 2.5D/3D, multi-chip modules (MCMs), and system-in-package (SiP). “There are a few semiconductor packaging and test companies in Brazil, as well as memory modules makers, that focus mainly on serving the local market,” said Rogerio Nunes, senior vice president and general manager of Smart Modular Technologies Brazil and president of ABISEMI. “We also see efforts happening in Brazil today to promote our competitiveness, such as the implementation of tax reforms and the reduction of rising labor costs. This is not only for the local market, but also to help grow exportation. The opportunities are right in front of us in Brazil.” Formed in 2014, ABISEMI consists of a dozen or so members, including HT Micron, Smart Modular, Qualcomm, among others. Fig. 2: Size of Brazil’s PC market in units. Source: Gartner Fig. 3: Size of Brazil’s smartphone market in units. Source: Gartner From fab to fabless Brazil’s semiconductor industry first emerged in the 1980s, when nearly two dozen companies from various countries established offices or plants there. During the 1980s, though, the Brazilian government implemented some unfavorable foreign direct investment and import tax policies. These policies proved to be disastrous. By 1990, every semiconductor company shut down operations in Brazil and moved them elsewhere. Some fled and set up operations in Asia, where they manufactured products and exported them back to Brazil. Then, in the early 1990s, the government enacted new and more favorable laws, which brought companies back to Brazil. In 1996, Motorola opened an IC design center in Brazil. (That group is now part of NXP). Dell, IBM and others set up plants there, as well. In 1997, Smart Modular, a U.S. supplier of memory modules, set up a manufacturing plant in Brazil. In 2009, HT Micron, part of South Korea’s Hana Micron, was formed in Brazil. HT Micron, along with Smart Modular, formed the basis of Brazil’s largest semiconductor-related markets today, namely memory modules, components and packaging. Brazil’s most ambitious effort occurred in 2002, when the government launched the National Microelectronics Plan. The goal was to develop the nation’s domestic IC industry, constructing fabs and creating IC design centers. The strategy was somewhat like one other member of the “BRIC” bloc of nations. BRIC, an acronym that refers to Brazil, Russia, India and China, are in similar stages of development. South Africa is now part of the group, as well. Like Brazil, China has a large manufacturing base and imports a large percentage of semiconductors from foreign suppliers. Unlike Brazil, though, China has thrown its weight behind its semiconductor industry over the years. It is pouring a whopping $150 billion into its domestic industry with plans to manufacture more of its chips. In the 2000s, meanwhile, Brazil lacked the necessary funding, know-how, and engineering talent to quickly establish a chip industry. “It’s looks easy on paper, but it’s completely different in practice,” said Risto Puhakka, president of VLSI Research. “Brazil also has a bit of a problem. It’s far away from the center of semiconductor manufacturing.” Finally, in 2008, the government launched CEITEC, a state-owned semiconductor organization. Located in the city of Porto Alegre, CEITEC planned to launch a chain of IC design centers throughout the country. The organization also set plans to build the nation’s first fab, a small 6-inch facility. CEITEC also obtained some technology from Germany’s X-Fab. “CEITEC’s plan called for the sponsorship of new design houses. That included design tools. It also included IC design courses to train new chip designers,” said Julio Leão da Silva, a spokesman for Acceitec, an association of employees of CEITEC. Another promising chip effort also emerged. In 2012, IBM, the National Bank for Economic and Social Development and EBX announced plans to build a foundry venture in Brazil. The goal was to provide foundry services for chip vendors. The Brazilian-based venture, called SIX Semiconductores, was supposed to start production in a $500 million fab around 2015. IBM provided 130nm and 90nm processes to the venture in return for a stake in SIX Semiconductores. But problems began surfacing at SIX Semiconductores around 2013, when Eike Batista, chairman of EBX, exited from the venture after encountering financial problems. In 2014, an Argentine conglomerate bought EBX’s stake in SIX Semiconductores, and the fab venture was renamed Unitec Semicondutores. Unitec started as a fabless design house, but the ultimate goal was to transfer the products to another fab. “Unitec Semiconductores was a pre-operational company. We had more than 30 IC designers and developed at least two products,” said Edelweis Ritt, director at Brazil’s HT Micron and director of innovation at ABISEMI. From 2014 to 2018, Ritt held various product development positions at Unitec. By 2018, Unitec struggled to find investors and obtain the necessary financing. The company ultimately folded. Brazil’s misfortunes continued in late 2020, when the government threatened to shut down CEITEC. At the time, CEITEC had developed several chip designs. It also had completed the backend operation of its 6-inch fab. The organization required more funding, but the government balked. “CEITEC’s sales were low for years because the government ordered projects and did not buy them,” Acceitec’s Leão da Silva said. “Once CEITEC started developing products for the private sector, sales started to grow.” Recently, the Brazilian government signed a decree to shutter CEITEC in its current form. For the IC design part of the unit, the government is looking to create a non-profit organization to maintain the designers and developed products. It may sell off the fab and the equipment. So Brazil’s dream to build fabs has fallen by the wayside. Building fabs is difficult to begin with and it takes deep pockets. “Let’s say you want to build a run-of-the-mill 28nm foundry. You are immediately looking at $10 billion out of the gate. Of course, the outcomes are very uncertain,” VLSI Research’s Puhakka said. Brazil lacks the capital and backing to make these types of investments. “For places like Brazil, there are several ways to go,” Puhakka said. “One way is to have one of the big companies build up their operations there. Take Vietnam, for example. Intel now has several billion dollars invested in their packaging capabilities in Vietnam. You also need a stable government in place. The government is probably willing to come up with some incentives, especially on the infrastructure side. In the case of Brazil, I don’t believe anybody has made that level of commitment.” Looking back, Brazil could have re-directed its resources elsewhere. “Indeed, Brazil has failed in building foundries and the capital could have been better spent,” said Heider Marconi, manager of technical sales at Chipus, a Brazilian IC fabless design house. “The semiconductor industry in Brazil could have gained a lot more. Instead of focusing on foundries, the money could have gone into fabless companies, ASIC companies, and design services. These businesses need less money to become self-sustainable than foundries.” Not all is lost in Brazil, though. In fact, the nation may have found its niche in semiconductors, such as IC design, memory modules and packaging. Over the years, several Brazilian-based fabless design houses have emerged, such as Chipus, IDEA!, Pi-tec, and others. Chipus, for one, started as an analog IP company in 2008, but has since moved into ASICs and other products. “We still develop analog IP, but not only in mature nodes,” Marconi said. “In the ASIC market, Chipus addresses a market that does not attract much attention. We focus on analog-intensive ASICs. We have projects that involve high voltage, high speed and custom analog.” Brazil is contributing in other ways. For years, Brazil has been a key place to find IC designers and engineering talent. “Brazilian universities are capable of developing good human resources in semiconductor design. Brazil definitely has a pipeline of talent,” Marconi said. “If you look at India, for example, they undoubtedly have a talent pipeline. Just like India, Brazil is a place that has both the universities and the potential to be an IC powerhouse. The challenge is that a lot of the Brazilians that leave Brazil do not come back. Nor do they open their own companies in the U.S. market, especially in Silicon Valley. In contrast, Indian engineers have set up shop back home to support their U.S. operations.” Moving to modules and packaging Besides IC design, the nation also manufactures and develops memory modules, embedded components, and other products. It also has a modest packaging and test industry. Several OEMs have manufacturing plants in Brazil. In total, Brazil’s semiconductor revenues reached $552.8 million in 2019, down from $626.5 million in 2018, according to ABISEMI. The decline was mainly due to the downturn in the memory market. Needless to say, Brazil wants to remain competitive in both the electronics and semiconductor sectors. The nation also hopes to lure more companies to invest in the nation. But there are some troubling signs. NXP’s decision to shut down its IC design operations in Brazil was a major blow. Ford also plans to shut down its manufacturing plant there, amid losses. Others may follow unless the government extends a law that supports businesses. PADIS, a law that provides incentives and tax breaks for businesses in Brazil, will expire in January of 2022. Smart Modular’s Nunes is urging the government to extend PADIS until 2029. Plus, the government needs to do more to support its semiconductor sector. For now, though, Brazil’s hands-off government policies makes this difficult. In the semiconductor segment, meanwhile, Brazil’s biggest industry revolves around the production and assembly of memory-related products, such as memory modules, embedded multi-media controllers (eMMCs), embedded multi-chip packages (eMCPs), and solid-state storage drives (SSDs). Smart Modular, for one, manufactures and markets memory modules in Brazil. “Smart Modular also manufactures and markets other products in Brazil, including the packaging and testing of advanced memory ICs, such as eMCP, eMMC, LPDRAM, and DRAM ICs,” Nunes said. “Smart Modular offers strong packaging and testing of advanced memories ICs, such as products with 11 die stacking capabilities.” Basically, eMMC are components that combine flash memory and a controller for embedded applications. Typically, eMMCs come in BGA packages. Meanwhile, eMCPs integrates eMMCs and DRAM into a package. Some of these products are stacked and stitched together using wire bonding techniques. Wire bonding is an older technology, but it is still widely used in today’s chip packaging. Going forward, Brazil wants to expand beyond its memory module and assembly niche, and move into advanced packaging and SiPs. For example, Brazil’s HT Micron, a supplier of eMMCs and eMCPs, recently rolled out what it calls a Multicomponent Integrated Circuit (MCO). The device is an RF transceiver that supports the Sigfox communications protocol. It combines an Arm Cortex core and STMicroelectronics’ low-power transceiver, which are housed in a SiP. “HT Micron will be a global player in the low-power WAN space,” Ritt said. “Our vision is to become a relevant partner for advanced packaging. Our Korean shareholder has high expertise in system-in-package from the memory business. Our mission is to extract value of this knowledge and use it in the incumbent IoT industry.” There are other packaging efforts in Brazil. For example, Smart Modular has an R&D line in Brazil, in cooperation with an R&D organization called Eldorado Research Institute. The goal is to develop new products and processes for the packaging and testing of ICs. Eldorado, one of Brazil’s largest R&D centers, focuses on the development of technologies in agriculture, automotive, energy, healthcare and mining. The organization also has a microelectronics effort, including an IC design house with testing capabilities. Along with various partners, Eldorado has co-designed several chips, such as demodulators, medical ICs and RFIDs. Recently, the organization opened an advanced packaging laboratory, which consists of cleanroom space and equipment. “We have an advanced packaging line for R&D and small runs,” said Eduardo Rodrigues de Lima, an R&D manager at Eldorado. “We have customers in this area here in Brazil.” Eldorado recently outlined a five-year roadmap in packaging. In the first phase, the lab has developed a photonics capability, MCMs and SiPs. Over time, the goal is to develop 2.5D/3D and flip-chip technologies. Conclusion It appears that Brazil finally may be on the right path in semiconductors. Instead of building costly fabs, the nation is looking for less capital-intensive areas. “Within packaging, for example, you have multiple opportunities. There are so many places you can go with those capabilities,” VLSI Research’s Puhakka said. But it’s unlikely the country will become a force in the semiconductor market like China. Brazil can address several growing, if not niche, markets. But even the niche markets take time and money to develop. Related Other Regional Articles and Knowledge Centers: China, Germany, and Israel