Business Solution

‘Michigan’s secret weapon:’ U.P. business is missing link in semiconductor solution

In just a couple years “chips,” “semiconductors” and “polysilicon” have entered the everyday lexicon.

One company tucked in Michigan’s Upper Peninsula has been tinkering with the microscopic electrical connections that make our cars, phones and TVs work for more than 50 years.

Calumet Electronics Corporation was founded in 1968 after the copper mines were shut down. The closures triggered a mass exodus from the surrounding area. To sustain the local economy, a banker with an interest in semiconductors found community investors to prop up a new business.

The unique start speaks to the area’s pride in being problem solvers, Chief Operating Officer Todd Brassard said.

“This company was created by and large to create jobs within a small community,” he said.

Calumet is now a leader in aerospace, defense, communications, electric power, medical, industrial controls, space, and national security sectors, and it could benefit from federal funds allocated through the recently enacted Chips and Science Act.

The act, signed by President Joe Biden this month, aims to bring semiconductor manufacturing back to America.

Factories that produce chips, called foundries, typically take three to five years to build. But strengthening the chip ecosystem, where Calumet excels, is something the country can invest in now, Brassard said.

Calumet hit its stride entering the new millennium, riding high on the anticipation around the internet and telecommunications. In 2000, 30% of global printed circuit board production was in the United States, according to trade association Institute of Printed Circuits.

But outsourcing quickly undercut the industry leaving the nation today with only 4% of that global share, according to the institute.

To survive, Calumet held on to its telecom boom earnings, bought up equipment left behind and leveraged themselves as domestic engineers and manufacturers.

Brassard estimates there are only 40 to 60 shops like Calumet still relying fully on U.S. labor.

“Offshoring engineering or offshoring manufacturing was always very tempting, but we didn’t want to lose control of our company,” Brassard said.

That resilience paid off as the pandemic highlighted vulnerabilities in global supply chains and the reliance on Asian factories.

Despite semiconductors being invented in the U.S., America’s global share of manufacturing has fallen from 37% to 12% in just three decades, according to the Semiconductor Industry Association.

Related: $52B semiconductor package is a ‘big freakin’ deal for Michigan’

Semiconductor innovation is really where the U.S. holds its ground.

American semiconductor firms have maintained their competitive edge in microprocessors and other leading-edge devices. It continues to lead in research and development, design, and process technology, according to the industry association.

“To build a product, you need the whole process,” he said. “You don’t just need a handful of silicon.”

Brassard’s team has taken up the mantra, “chips don’t float” meaning the tiny, fingernail-sized chip needs packaging to sit in and an electrical system to connect it. Brassard compares it to an engine without a transmission.

Engineers at Calumet have developed substrates to route that connection between the chip and the application, like a phone or car.

Related: Michigan adds nearly 600 jobs in auto, EV and semiconductors

Earlier this year, Calumet received $2.6 million through business and community development grant programs from the Michigan Economic Development Corporation.

The investment is enhancing Calumet’s newly constructed 35,000-square-foot manufacturing facility to increase capacity for substrates. It will also create an estimated 80 new manufacturing and engineering positions.

“We’re just one shop in the U.P., but we can lead by example,” Brassard said. “If a bunch of Yoopers can do it, what’s the excuse of everybody else?”

Pride and patriotism have been a great recruitment tool.

“We want the engineers to be engaged and have fun and do challenging work,” Brassard said. “Would you rather just build a toaster circuit board every day or would you rather save the country?”

It seems counterintuitive that Calumet’s geography is one of its competitive advantages given it takes almost a full day from any major metro area to arrive at the facilities. But just 20 minutes down the road is Michigan Technological University.

“The people that are solving all of these really dire and critical problems for the U.S., they’re all 25 and younger,” Brassard said.

Michigan Tech and the rural nature of the U.P. may also make the Keweenaw Peninsula a contender for a much less publicized piece of the Chips act.

Tucked into the massive bill, which totaled $280 billion, are two place-based initiatives.

The first offers $10 billion for 20 communities over five years to create regional technology hubs in distressed areas of the country.

The second initiative offers $1 billion for 10 communities over the course of five years. This “Recompete Act” pilot would be aimed at “distressed communities” with significantly below average employment-to-population ratios.

The Recompete Act is based off the work of economist Tim Bartik of the W.E. Upjohn Institute in Kalamazoo.

Bartik said he sees the initiatives as complementary and there could be areas of the U.S. that check both boxes.

For instance, in much of the U.P., less than 78% of the prime age workers are employed. The U.P. also already has the technology presence of an engineering university in addition to government contractors.

The budget was slashed from the initial pitch of $175 billion over 10 years, but the funds still could significantly impact the U.P., Bartik said.

“A small community, rural community with relatively modest population, it’s easier with smaller amounts of funds to really make a difference to the growth path,” he said.

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Brassard said he doesn’t yet know whether Calumet will receive funding from the Chips act, which will give $52.7 billion to subsidize manufacturers and research.

Funding is to be allocated over the course of five years. Brassard sees this as an opportunity to connect politicians with engineers and manufacturers. He laments he recently heard a politician describe circuit boards as an expensive piece of plastic holding the chip.

Navigating bureaucracy is new to the folks at Calumet, but making something out of nothing has been the company’s specialty for 54 years. And that, Brassard said, is what makes the U.P. “Michigan’s secret weapon.”

“At the end of the day, what we do up here is we build things, we make things,” he said. “We survive.”

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