‘Michigan’s Secret Weapon:’ UP Business Missing Link in Semiconductor Solution

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

A company based in Michigan’s Upper Peninsula has been working with the microscopic electrical connections that make our cars, phones and televisions work for more than 50 years.

Calumet Electronics Corporation was founded in 1968 after the copper mines closed. The closures caused a mass exodus from the surrounding area. To support the local economy, a banker with an interest in semiconductors found community investors to support a new business.

The unique start speaks to the area’s pride in being a problem solver, said chief operating officer Todd Brassard.

“This company is largely designed to create jobs within a small community,” he said.

Calumet is now a leader in the aerospace, defense, communications, electric power, medical controls, industrial, space and national security sectors, and can benefit from federal funding allocated through the recently passed 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 smelters, 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 expectations about the Internet and telecommunications. In 2000, 30% of global production of printed circuit boards was in the United States, according to the trade association Printed Circuit Institute.

But outsourcing quickly decimated the industry, leaving the country today with just 4% of that global share, according to the institute.

To survive, Calumet kept its profits from the telecom boom, bought up abandoned equipment, and used itself as local engineers and manufacturers.

Brassard estimates there are only 40 to 60 stores like Calumet that still rely entirely on American labor.

“Offshore engineering or offshore 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 weaknesses in global supply chains and reliance on Asian factories.

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

Connected: $52 billion semiconductor package is a ‘big weird’ deal for Michigan’

Semiconductor innovation is really where the US holds ground.

American semiconductor firms have maintained their competitive edge in microprocessors and other cutting-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 silicone.”

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

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

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

The investment is augmenting Calumet’s newly constructed 35,000-square-foot manufacturing facility to increase substrate capacity. It will also create around 80 new manufacturing and engineering positions.

“We’re only one store in UP, but we can lead by example,” Brassard said. “If a bunch of Yoopers can do it, what’s everyone else’s excuse?”

Pride and patriotism have been a great recruiting tool.

“We want engineers to be engaged and have fun and do challenging work,” Brassard said. “Would you like to build a toasting board every day or save the place?”

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

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

Michigan Tech and the UP’s rural nature could also make the Keweenaw Peninsula a contender for a much less publicized part of Chips’ act.

Included in the massive bill, which totaled $280 billion, are two country-based initiatives.

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

The second initiative provides $1 billion to 10 communities over five years. This pilot “Recompetition Act” would target “struggling communities” with significantly below-average employment-to-population ratios.

The Recompete Act is based on the work of economist Tim Bartik of the WE Upjohn Institute in Kalamazoo.

Bartik said he sees the initiatives as complementary, and there may be areas of the US that check both boxes.

For example, in most of UP, less than 78% of prime age workers are employed. UP also already has the technological presence of an engineering university in addition to government contractors.

The budget was reduced from the initial level of $175 billion over 10 years, but the funds could still significantly affect UP, Bartik said.

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

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Brassard said he does not yet know whether Calumet will receive funding from the CHIPS Act, which will provide $52.7 billion to subsidize producers and research.

The funding will be distributed over five years. Brassard sees this as an opportunity to connect politicians with engineers and manufacturers. He laments that he recently heard a politician describe county boards as an expensive piece of plastic that holds the chip.

Sailing red tape 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 UP “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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