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Microchip plant

The production of integrated circuits in Porto Alegre and seven design houses have started transforming the Brazilian micro-electronics industry

MIGUEL BOYAYANPrinting circuits on chips contributes to innovation in the countryMIGUEL BOYAYAN

The start of spring in September may also underscore a new and hopeful stage in Brazil’s micro-electronics sector, with the inauguration, planned for the end of the year, of the country’s first integrated circuit plant. Also known as chips, these devices are fundamental for the functioning of all electronic equipment, both for processing as well as for storing information. The plant in Porto Alegre, in the state of Rio Grande do Sul, is housed in the Center of Excellence in Advanced Electronic Technology (Ceitec), a public enterprise set up in 2003 by the federal, state and municipal governments with the co-operation of several universities, in addition to Motorola. At the same time the Ministry of Science and Technology (MCT) is encouraging the creation and operation of seven design houses at Brazilian research institutions, to develop and design the circuits to be printed on the chips that will be produced either in Ceitec, which already has one of these units abroad, or in other plants that will be set up in the country.

At first, chips for computers, laptops and mobile phones will not be manufactured, because these devices  require smaller, cutting edge products currently made by Intel, Advanced Micro Devices (AMD) and other companies. “The standard of the technological level of the chips made in Brazil will meet the needs of  85% of the Brazilian market; they will be suitable for televisions, including digital ones, television station transmission equipment, the automotive industry, systems for the security area and agriculture and livestock farming,”  says Sergio Souza Dias, and electrical engineer and Ceitec’s CEO. “The Center won’t produce circuits with cutting-edge technology, but devices to be used in specific areas, with technology that is sufficiently competitive at this particular point in time,”  explains Professor Jacobus Swart, current director of the Renato Archer Research Center (Cenpra) and a professor at the Electrical Engineering School of the State University of Campinas (Unicamp). He was involved in preparing the National Micro-electronic Program, presented in 2002, which pointed out the need for microchip plants and design houses.

The production of chips designed and produced in Brazil will make it easier to manufacture innovative products developed by Brazilian companies and researchers. “The initiative should facilitate the innovation of electronic products in several areas. It also offers an opportunity for incorporating knowledge, training and developing human resources and developing technology produced by Brazilian research institutions. I believe this is an important step for the generation of a micro-electronics environment or ecosystem in Brazil. This type of initiative abroad has led to the establishment of new companies. We hope the same thing will happen here,”   says Swart.

One of the facts connected with the production of integrated circuits in Brazil is to reduce the trade deficit (exports minus imports) in the electrical and electronics sector. In 2006, this deficit reached US$9.5 billion. Electrical and electronic components accounted for 63% of the US$18 billion  imports in this sector, according to the Brazilian Electrical and Electronics Industry Association (ABINEE); of this total, US$3.4 billion were specifically semiconductors. This association’s estimates point to an even greater deficit in 2007: US$12.3 billion.

In the early 90s, there was a similar trade deficit situation in India and China, but over time these two countries have  built their own design centers and microchip plants that  has encouraged the development of the infrastructure and human resources needed for an advanced integrated circuit and electronic equipment production complex, although both these countries benefit from cheap labor. “After this beginning, a US$3 billion AMD plant was installed in India and China, which is home to the world’s largest producers of semiconductors and exported US$180 billion of technology products (semiconductors and end consumer products) in 2004, thereby moving ahead of Europe, Japan and the USA,”  reports Dias. The world’s semiconductor market is currently worth around US$300 billion, a considerable figure that no country can afford to ignore.

Eduardo cesarEncapsulated chipEduardo cesar

One of the objectives in introducing Ceitec is to attract other chip manufacturers and producers of other semiconductor products, as well as correlated services, such as chip encapsulation in the final production stage, for example. “In other places in the world, a concentration of many companies means easier logistics for everybody.”  Dias is also in favor of a possible second semiconductor plant, that may be set up in the state of Minas Gerais, in Lagoa Santa, part of the Greater Belo Horizonte area. Called Companhia Brasileira de Semicondutores (CBS), the plant is the brainchild of  Wolfgang Sauer, business consultant and former President of Volkswagen do Brasil. Investments in this possible factory should reach US$500 million and negotiations are under way with Brazilian and foreign business groups, the National Economic and Social Development Bank (BNDES), and the federal and Minas Gerais state governments.

“It’s not going to compete with Ceitec, because they’re going to manufacture other types of chips and on a large scale,” says Dias. CBS’s intention is to produce the types of circuit that are suitable for computers and mobile phones. Installation of this plant, which is under negotiation, should benefit from Provisional Measure 352, now Law 11,484, passed by the National Congress in March and by the President’s Office in May, which instituted the Program of Support for the Technological Development of the Semiconductor Industry (PADIS). The law provides tax breaks for the installation of companies that produce semiconductor materials in Brazil,  exemption from Corporate Tax (IRPJ), Social Security Funding Contributions (Cofins), Contributions on Intervention in the Economic Domain (CIDE), the Social Integration Program (PIS) and Excise Tax on Manufacturing (IPI).

“These conditions are fundamental to make the tax burden lighter in connection with such investments; without this, it’s impossible to get investors on the same terms as in other countries. If a company already has plants in a country it’s easier to expand there, when there are tax incentives. At least now we have the possibility of discussing the issue, whereas before we didn’t even have that,”  says Henrique de Oliveira Miguel, MCT’s General Coordinator of Micro-electronics. The advantages offered for setting up industries linked to the micro-electronics sector are explained in detail in the Industrial, Technological and Foreign Trade Policy (PITCE), which, in 2003, prioritized four sectors (capital goods, software, pharmaceutical products and semiconductors) and in the Growth Acceleration Program (PAC), which should also focus investments on this sector.

The Porto Alegre plant will produce important microchips for certain specific sectors, as demonstrated by the first chip planned and designed at Ceitec and delivered to Altus, from São Leopoldo, in Rio Grande do Sul, in April of this year. “We developed the chip in our design center and sent the project to a company in Germany, which subsequently sent us the finished product. When the plant is finished we’ll be able to make it here,”  says Dias. The chip will be used in automation equipment called logic programmable  controllers on Petrobras’s offshore oil rigs.

Another product that came out of Ceitec’s design center was an intelligent electronic labeling system called RFID (radio frequency identification). This system, comprising a chip, micro-aerials and frequency readers, enables the storage of product information such as location, price, date, time and features. The entry and reading of this information is performed by micro-readers via a radio signal or aerials installed in any environment. One practical use of RFID, which will shortly become a reality, is putting products in a supermarket trolley without having to remove them  when going through the checkout. Just having the trolley go past the checkout desk will be sufficient to ring up the purchases, as each product will have an RFID label. Each product purchased will be automatically deducted from the supermarket’s inventory.

ceitecRFID chip planned at Ceitecceitec

RFID labels are currently being used mainly in logistics companies to move cargo, but they can also be used for tracking packages, equipment in transit and animals, in addition to books in libraries, baggage on aircraft, automobiles, tickets to entertainment events and passports. Ceitec’s RFID project was carried out with the Dispatched Systems Group (GSE) from the School of Information Technology at PUC-RS, where a company, Innalogics, was set up in the incubator of TecnoPUC, the university’s technology center, which plans to use the label in its logistics sector.

The Ceitec plant is expected to start producing in the first half of 2008, once the equipment has been installed and tested. The plant has a “clean-room” with exact control of particles in the air, in which only 100 particles greater than 0.5  micron (1 micron is equal to 1 millionth of a meter) per cubic foot of air are tolerated. This temperature and pressure controlled environment is essential for the manufacture of semiconductors.

Most of Ceitec’s equipment was donated by Motorola with the support of its company, Freescale, in the semiconductor area. “Motorola was transforming a plant in Austin, in the United States, and gave us the equipment in 2002,”  says Dias. “In 2000, as part of its company strategy, Motorola decided to transfer some of its semiconductor production to other countries, such as India and China. The Rio Grande do Sul government was interested and began to negotiate the installation of the plant. The problem is that if it had been bought in the market the equipment would be worth R$15 million, whereas the infrastructure necessary for production amounted to R$150 million.”  Things began to change in 2003, when MCT decided to invest in a big way in microelectronics and Ceitec, which had already been set up, asked for help from consultants, including Freescale itself, to upgrade some of its equipment and improve the production process.

To assemble the plant it was necessary to have a broad institutional understanding between Rio Grande do Sul and the federal government. MCT invested R$200 million in building the plant and setting up the design house. A 5.6 hectare area, or nearly 50,000 sq.m, valued at nearly R$5 million, was given by the Porto Alegre city administration. The State government supplied the infrastructure, power and water projects, worth almost R$ 4 million. They also provided non-repayable funds from the Studies and Projects Funding Agency (FINEP) to a total of R$7 million, and grants from the National Council for Scientific and Technological Development (CNPq) worth R$2 million.

Ceitec will import highly pure silicon wafers to produce its chips. Once the design is ready, the circuits are printed on the wafers, the so-called prototype phase, the most important and expensive part of the entire process. Subsequently, they are cut, so as to separate each small piece of the wafer into one microchip. The final stage is encapsulation, which for the time being will be done abroad.

Ceitec is preparing to produce 4,000 chip wafers a month, which should bring in R$40 million in revenue a year. The design center is expected to account for a further R$20 million annually. “Our idea is that revenues should equal expenses within three to four years,” says Dias. At present, Ceitec is state-owned, but who knows, in future we may be able to go public. Initially Ceitec will have some 200 to 250 employees, of which 120 will work in the design house. “We’ve brought back six Brazilian professionals who were working in micro-electronics companies in Germany, the USA, France and Portugal. They are people with very fine technical and commercial know-how.”

Qualified manpower is one the concerns of this sector that is about to establish itself here. “There’s a lack of project professionals in Brazil, even though we pay good salaries,”  says Miguel, from MCT. Professionals leaving university are being put to good use. “In September we’ll have 80 project engineers in the seven MCT-supported Brazilian design houses.”  In all, they have received R$12 million since 2005. Besides Ceitec, the first units are being set up at Cenpra, in Campinas, at the Center for Advanced Studies and Systems of Recife (Cesar), in the state of Pernambuco, at the Technology Center of the Manaus Industrial Park (CT-Pim), in state of Amazonas and at the Laboratory of Integrated Technology Systems (LSITec), connected to the Polytechnic School of the University of São Paulo (USP). The Laboratory for the Integration of Circuits and Systems (Lincs) at the Strategic Technology Center of the Northeast (Cetene), in Recife, and the Werner von Braun Center in Campinas, São Paulo, recently completed the seven houses. “We’re hoping for considerable growth in microchip projects and we also hope that in the future Brazil may even be able to export them, competing with China and India,”   says Swart from Cenpra.