The US semiconductor industry is a worldwide industry leader that controls about half of global market share through sales of $209bn in 2018. It directly employs 250 000 people in the US and supports more than 1 million additional jobs in that country.
The global value chain is monopolised by the US, starting with the first step of research and development, followed by the second step in Asia where the silicon ingots are cut into wafers.
In the third step the blank wafers are completed as finished wafers in the US, then in the fourth step the finished wafers are cut into dies in the US. In step five the dies are assembled, tested and packaged in Asia.
From there in step six the final product is shipped for inventory to China, where it is integrated into step seven as a consumer good by end-product assembly and it is shipped to the US in step eight for end product marketing to the global customer.
President Cyril Ramaphosa, at the state banquet held in honour of Chinese President Xi Jinping last year, said: “We celebrated our co-operation in science, technology and innovation today and I am heartened by the depth of the co-operation in cutting-edge projects geared towards the realisation of the 4th Industrial Revolution (4IR).”
At the BRICS Business Forum the following day, Dr Iqbal Survé, who at that time was the chairperson of the South African BRICS Business Council, introduced Jinping to about 2000 businesses from BRICS countries.
Xi highlighted that 4IR should be confronted within the next decade and that new global growth drivers must be unleashed to replace old ones.
Xi argued that a new round of revolution and transformation in science, technology and industries featuring artificial intelligence, big data, quantum information and biotechnology were gaining momentum.
We must seize this important opportunity to enable emerging markets and developing countries to achieve leapfrog development, said Xi.
This year Ramaphosa appointed members of the Presidential Commission on the Fourth Industrial Revolution (4IR), to identify relevant policies, strategies and action plans to position South Africa as a competitive global player.
I argue the 4IR Commission should focus its attention on the manufacturing of semiconductors to ensure the country is part of the global value chain to support employment creation and the achievement of high inclusive economic growth. South Africa could benefit from the Chinese semiconductor industry, which currently produces only 5 percent of the global demand for own consumption.
Manufacturing of semiconductors is important to South Africa.
Semiconductors are the brains of modern electronics and are giving intensification to new technologies that hold the promise to transform society for the better, including artificial intelligence, quantum computing, advanced wireless networks, the Internet of Things, self-driving cars, and more. It is generally argued semiconductors’ greatest potential lies ahead.
It is critical for the 4IR Commission to develop policies, strategies and action plans to manufacture semiconductors in South Africa to prevent the situation that Africans are only consumers of modern electronics.
The 4IR Commission should also encourage the establishment of ICT companies to support employment creation and economic growth.
While the government was pinning its hopes on the 4IR Commission, Ramaphosa did not welcome the listing of the biggest black ICT company on the JSE, not in terms of job creation, nor capital investment.
The silence of the government and Business Unity South Africa were deafening on the listing of AYO Technologies Solutions - it was only the Black Business Council that welcomed the successful listing.
Another example was the actions of the Companies and Intellectual Property Commission (CIPC) that made an irrational decision by issuing it with a compliance notice.
The high court in Pretoria ruled that the order issued by the CIPC compelling the PIC to recoup the money it invested in AYO was unlawful.
South Africa will never be able to address its unemployment crisis if the government and its agencies undermine Broad-Based Black Economic Empowerment (BBBEE) companies and glorify white-owned companies.
Julius Malema of the EFF has warned Ramaphosa that he was not elected by Stellenbosch.
Another example of co-ordinated media attacks on BBBEE ICT companies was the case of Sagarmatha Technologies, which was to be listed on the JSE. Sagarmatha received a letter from the JSE giving notice to the company that the listing could no longer proceed.
The JSE argued that the company did not submit its annual financial statements to the CIPC at the time that the pre-listing statement was approved by the JSE.
Although this was not a requirement, the listing investment of R5bn was a loss to the country, including the 4500 top computer science and engineering jobs that would have been created across Africa in cities like Lagos, Cape Town and Cairo.
The pre-listing statement of Sagarmatha argues for partnerships and plans for major investments in skills and development in the technology space. These include university scholarships and bursaries; training for new computer programmers and promoting IT literacy for 5000 technology trainees on the continent.
I hope going forward that the 4IR Commission will create a dynamic environment for listed, private companies and SMMEs to prosper, create jobs and support economic growth.
As Xi points out, the global semiconductor sector market offers opportunities not to be missed.
This is an opportunity for South Africa to build a semiconductor manufacturing facility, if an entrepreneur like Dr Survé is supported to facilitate a joint venture. MinTek could design the silicon ingots processing machine using the Czochralski process from beneficiated Si02 according IOTA 8 standard.
Such a venture is capital-intensive, costing upwards of $10bn, while relying on hundreds of specialised tools, machines and equipment, many of which cost millions a unit.
The 4IR Commission must decide how South Africa will break into the powerful global value chain of semiconductor manufacturing to support job creation and higher inclusive economic growth.
Dr Dennis George completed his master’s degree in Management Technology and Innovation with the Da Vinci Institute.