Canadian hardware firms face growing concerns over tariffs as geopolitical tensions prompt shifts in production strategies. Ramee Mossa, leader of FTEX, notes that many of his clients are relocating production from China to Vietnam due to fears of economic repercussions from tariffs. While these changes stem from the broader geopolitical situation, Mossa is particularly concerned about the challenges that tariffs could impose on Canadian hardware startups and their long-term survival. However, he views these tariffs as more of a minor inconvenience than a catastrophe, particularly since FTEX manufactures its e-bike systems in Malaysia using parts sourced from Taiwan, bypassing some tariff hurdles.
Strengthening Canada’s Tech Industry Against Tariffs
Hamid Arabzadeh of Ranovus, a company specializing in advanced silicon chips for AI systems, emphasizes the importance of strengthening Canada’s tech industry to defend against the impact of tariffs. Arabzadeh argues that Canada should take a more proactive approach in securing its industry, suggesting that the government could block AI hardware imports when Canadian alternatives exist. Arabzadeh also suggests that if such countermeasures were put in place, it could force global giants like Nvidia and AMD to integrate Canadian products into their systems for the Canadian market.
Ranovus designs its products in Canada but manufactures silicon wafers in the U.S., sending them back to Canada for final processing. This intricate process underscores the complexity and cost of chip production. Avinash Persaud, vice-president at VentureLab, explains that chip factories, machinery, and their production processes can cost billions of dollars. He points out that it takes months to produce chips, and even a speck of dust can disrupt the process, further complicating the chip manufacturing landscape. Such challenges make it unrealistic to expect rapid chip manufacturing capacity in Canada, as countries like Taiwan, which is responsible for 60% of the world’s semiconductor production, began building its industry in the late 1970s.
Rising Costs and Global Competition
Mossa points out that Canadian companies, like FTEX, are facing rising costs compared to their international competitors, largely due to the challenges posed by tariffs and the global manufacturing landscape. “We’re seeing their prices kind of stay steady and we’re seeing our prices go up, and at the end of the day, it gives us less room to maneuver,” Mossa said. He warns that these increasing costs could limit Canadian companies’ ability to compete effectively on the global stage.
Arabzadeh argues that Canada could benefit from imposing restrictions on foreign AI hardware that uses foreign components, which would allow Canadian manufacturers to maintain a competitive edge. This could force international companies to use Canadian-made products if they want to sell to the Canadian market, a move that Arabzadeh believes would be advantageous for the local industry.
Arabzadeh’s strategic shift could bolster Canada’s domestic tech industry, offering long-term resilience against international market fluctuations. He also stresses that local support and policy clarity are essential for ensuring the industry’s sustainability. “When you have clarity around that, it makes investment, foreign direct investment partnerships, long-term strategies much more likely,” Persaud said, highlighting the need for a national strategy to navigate the uncertainty around tariffs and future industry regulations.
Uncertainty surrounding policies and the tariff situation is posing challenges for hardware startups, making it harder to secure funding and stability in a competitive market. “For hardware startups, it’s going to make it more difficult for us to raise (money) and it’s going to make it more difficult for companies that make hardware to survive,” Mossa said.
The production process’s intricacy further complicates matters. “It can take several months to engrave and transform silicon wafers into chips and the process can be upended by as little as a speck of dust,” Mossa said.
The consumer ultimately bears the brunt of these challenges. “And it’s just the consumer that’s going to suffer in the end,” Arabzadeh said.
What The Author Thinks
The growing concerns over tariffs and geopolitical tensions are forcing Canadian hardware firms into difficult positions. While some companies are trying to navigate these challenges by shifting production to alternative locations, the cost pressures are rising, and local startups face increasing difficulty in remaining competitive. The complexities of chip production and the need for strategic policy shifts underscore the need for stronger support for Canada’s tech industry. If steps aren’t taken to protect domestic manufacturers, these challenges could harm the long-term viability of Canadian hardware companies, ultimately affecting both industry sustainability and consumers.
Featured image credit: Jared VanderMeer via Pexels
Follow us for more breaking news on DMR