(Bloomberg) -- International Business Machines Corp. will expand its Canadian semiconductor packaging and testing plant with more than C$1 billion ($730 million) in investments over the next five years.

Focused on advanced semiconductor components, IBM’s 800-acre site in Bromont, Quebec, about 50 miles east of Montreal, is the largest of its kind in North America, and home to Canada’s first universal quantum computer. 

Packaging, a technical process in which chips are transformed into microelectronic components, is an essential part of the supply chain and requires a skilled workforce. There’s very little semiconductor packaging capacity on the continent, and most of it is at the 1,000-employee Bromont facility.

“Even if we produce the processors at factories in the US or Canada, we would then have to send them back to Taiwan for packaging,” Jamie Thomas, general manager of technology lifecycle services at IBM, said in an interview. “What you really need is a full supply chain onshore.”

IBM’s C$1 billion Bromont growth plan will unfold between now and 2029, she confirmed. After months of talks with government, IBM announced an initial phase on Friday that will create 280 skilled jobs. 

The first stage is an investment worth C$227 million — including an IBM partner, the MiQro Innovation Collaborative Centre — that will expand the existing Quebec plant and build a research and development lab.

The announcement is “a critical piece to support our growth at this site,” said Thomas. The Canadian and Quebec governments will provide in total about C$100 million for this first phase, according to statements.

“It’s important that Canadians be at the center of developing these technologies — but it’s important for the world, particularly for our allies,” Prime Minister Justin Trudeau said at a news conference.

Supply disruptions during the pandemic have shown the great dependence of the US on East Asia, which accounts for 75% of the global semiconductor production.

Last year, when US President Joe Biden visited Trudeau in Ottawa, IBM and the Canadian government signed a high-level agreement on semiconductor cooperation.

No Big Subsidies

Canada is a so-called “fabless” G7 nation — it has skills, but no large-scale chip factory. Those in the chip manufacturing industry are eager to see a broad strategy from the government backed by substantial support, akin to the billions of dollars in commitments given to the electric-vehicle battery industry for plant construction and operating subsidies.

Government incentives for the chip industry will be focused, Industry Minister Francois-Philippe Champagne said Friday in an interview. “It’s probably not for us to replicate what already exists in the US, but to be complementary and to look at what are the strategic places where we can play a role.”

The US, through the 2022 Chips Act, has set aside $39 billion in direct grants, plus loans and loan guarantees worth $75 billion to incentivize domestic semiconductor production.

Canada positioning is focused more on improving North America’s supply-chain resiliency with advanced capabilities for chips dedicated to highly specialized sectors such as aerospace and health care, rather than supporting large-scale factories.

The lack of major government investments isn’t too much of a concern for Benjamin Bergen, who’s president of the Canadian Council of Innovators. Committing hundreds of millions of dollars to a single foreign-based multinational would only mean “the government hasn’t thought more strategically about what type of semiconductor strategy it wants to have,” he said.

--With assistance from Brian Platt.

(Adds comments from industry minister and industry group from 12th paragraph.)

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