Semiconductor crisis makes Guedes study national manufacturing

The Ministry of Economy started to discuss measures to stimulate the national production of semiconductors, components that have been facing a global supply problem since the pandemic and that are crucial for the functioning of a series of products – from toys and cell phones to planes and systems of communication. defense.

Parts delivery was affected during the pandemic and continues to challenge car production lines. The problems could be intensified by the war in Ukraine and the recent increase in Covid-19 cases in China, which has led to further disruptions at factories.

Given the persistence of concerns, members of the economic team have been talking to business representatives linked to the manufacture of semiconductors and vehicles, who claim that Minister Paulo Guedes (Economy) agreed with the importance of the country having an industry focused on semiconductors.

There is still no final decision on what is needed to attract companies or what measures will be adopted, but the minister has signaled the possibility of cutting taxes to stimulate companies.

Guedes prefers to reduce taxes broadly, so that the changes are felt by the economy as a whole (and not just by a specific sector). For this reason, he continues to defend the reduction of the IRPJ (Income Tax for Legal Entities) – a project he sent to Congress and which was parked in the Senate due to different challenges.

Even so, participants in the discussions report that the minister says that, in the case of semiconductors, the decrease in the IRPJ proposed in the project would not be enough and, therefore, a deeper tax cut could be adopted.

The discussions with the head of the economic team resulted from the analysis of a working group formed by the government and companies to discuss the situation of semiconductors.

Examples of other countries that are in a worldwide race to stimulate the sector are used as a reference for the discussions. Among the initiatives taken by the world, there are subsidies and even the division of costs of construction of factories between the State and companies.

One of the initiatives analyzed is from the United States, where lawmakers have advanced a project of US$ 52 billion in subsidies for the production of semiconductors. The country, like others, is trying to reduce dependence on Asia — which is responsible for meeting about 80% of global demand.

The European Union intends to double its semiconductor production by 2030. Meanwhile, countries like China, Taiwan and Singapore continue to allocate incentives to companies in the field and specialists.

Depending on the final format of the measure, a decision for sectoral incentives may contrast with the view of Guedes – who usually refuses to use public coffers for sectoral policies.

Antônio Jorge Martins, a professor at FGV (Fundação Getulio Vargas), says that it is very difficult to see the sector develop without state incentives due to the size of the necessary investments. Even so, he criticizes such a decision in the Brazilian case.

“We are not in a position to stimulate this type of market and we cannot compete with other companies, because we do not have the scale to do so”, he says. For him, the country would first need to raise the population’s income so that the consumer market attracts manufacturers to the national territory.

“We have 60 million people in Brazil depending on the government to survive. Our population has reduced income. We need income to increase so that we can have a market again and, thus, create a demand for semiconductors”, he says.

The country currently has the state-owned Ceitec (National Center for Advanced Electronic Technology) focused on semiconductors, but the company is in the process of liquidation. “It’s not in a position to [a fabricação] be state-owned, none of these large companies are state-owned. They don’t have the structure to face this technological challenge”, says the professor.

The problem in the supply of semiconductors has reached an extreme during the pandemic and continues to be felt in car manufacturing. With Covid-19, remote work has boosted demand for electronics as automakers have slowed their orders in the face of uncertainty — disrupting the supply chain.

The shortage made automotive manufacturers produce 10 million fewer vehicles in 2021, according to estimates used by Anfavea (National Association of Motor Vehicle Manufacturers). In Brazil alone, 300,000 to 350,000 units were no longer produced due to the lack of components.

When consulted, Anfavea stated that the difficulty with semiconductors should persist. For 2022, the latest forecast is that the problem will subtract up to 8 million vehicles from world manufacture and a normalization can only be seen in 2025. The estimates used by the entity were made in December – before the war in Ukraine, which could worsen the situation.

Rogério Nunes, president of Abisemi (Brazilian Association of the Semiconductor Industry), says that the development of national production may not have results in less than 10 or 15 years. Even so, he defends government policies for the sector.

“It’s a matter of mastering the technology. The semiconductor industry is the basis for other products and, therefore, will increase our levels of social and economic development. It is absolutely strategic,” he says.

According to him, less than 20 companies operate in the semiconductor sector in Brazil —but the companies do not participate in the complete chain and about 70% of the inputs are imported.

“Semiconductors are inserted in absolutely all sectors of the economy. Before it was only in the electronics industry, but today we see in the automotive sector, in the medical sector, in security, in telecommunications and even in agriculture. Everything today depends on semiconductors”, he says.

A recent report by consultancy Deloitte states that the largest global companies are increasing their capacity at unprecedented levels, with investments of US$ 200 billion by 2023.

Resources are being directed to where the industry is already installed, such as Taiwan and South Korea, but also to places closer to the rest of the chain in a movement of regionalization — such as the US, China, Japan, Singapore, Israel and Europe. Brazil is not mentioned as a destination.