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Positioning Africa As A Key Player In The Global Semiconductor Ecosystem

Global semiconductor industry; estimated to be worth USD700Billion with a compounded annual growth rate (CAGR) of 12.3% is commonly referred to as “the brainbox of all modern technology and innovation”.

The sector produces micro-chips and hardware appliances that control computing devices, smart appliances, transportation and health care equipment, data centers, satellites, energy, and manufacturing equipment as well as military artillery and security systems.

The semi-conductor industry creates technology that will drive the Fourth Industrial Revolution through technological breakthroughs in automation, cloud computing, big data, medicine, artificial intelligence, robotics, the Internet of Things (IoT), energy storage and biotechnology.

Semiconductors are the essential building blocks of the digital age, upon which entire technology value chains rest. These miniscule electronic devices are made from silica sand, germanium, or gallium arsenide compounds and primarily categorized into: – (1) microprocessors (2) memory chips

(3) commodity integrated circuits and (4) complex “systems on a chip.” (which are advanced microprocessors that enable real time data processing and analysis of data for automated decision making).

The global semiconductor ecosystem is made up of businesses that focus on fabrication plants or manufacturing of microchips on the one hand (foundries), and on the other hand, entities engaged in the design of microchips (fabless); in some cases, certain entities are able to combine and integrate design and manufacture of semiconductors into a single business.

It is no surprise that the Asia Pacific region continues to dominate the Semiconductor market with Countries such as Taiwan, South Korea, China, and Japan accounting for more than half of the global market share. South Korean Samsung is known for production of microchips while Taiwan Semiconductor Manufacturing Co. Ltd is considered as provider of the best foundry services for the global logic IC industry.

North America comes closely afterwards with the USA being home to some of the world’s largest semi-conductor companies with companies like USA’s Intel Corporation, known for its computer processors and considered the world’s largest semiconductor chip manufacturer. USA’s Nvidia Corporation is a pioneer in accelerated computing and a major supplier of chips and computing systems for AI. Germany and Israel equally maintain dominant presence in the industry as they are also home to world-leading institutions in semiconductor research and development.

Despite Africa holding some of the biggest deposits of silica sand and other rare earth metals which are the primary resources utilized in semi-conductor production and manufacture; the continent sits at the absolute bottom of the Value chain accounting for a very modest portion of the global market, with less than 1% of the global market share.

Whilst the continent remains heavily dependent on the importation of semi-conductor technology for its key industries; countries like Kenya, Uganda and Sudan record minimal production efforts.

Africa’s semiconductor balance of trade remains in consistent deficit whilst recording growing consumption rates as the continent continues the race towards critical technological advancement in energy production, manufacturing, heavy industries, education, security, and healthcare, owing to rapidly changing

technology and digitization. It is clear that if Africa desires to drive home grown innovation and technology in a competitive way, developing its own semiconductor industry is inevitable. Being already endowed with an abundant deposit of rare earth metals the Continent sits in a position of significant advantage with the capacity to become what Asia-Pacific is to the world today “the hub of semiconductor design and manufacture”. South Africa, Egypt, Algeria, and Morocco possess significant deposits of silica sand while Nigeria has large deposits of rare earth metals. With the right policies, financial investment and Government will; Africa is well able to become the world’s biggest semiconductor hub.

In an increasingly digitized world, access to technology is pivotal for economic growth and global competitiveness. Africa, with its youthful population and burgeoning innovation hubs, stands at the brink of a technological revolution.

However, to fully harness its potential, the continent must prioritize the development of its semiconductor industry. Africa has over the years positioned as a core extractive market supplying major semiconductor hubs with key minerals and materials utilized in their production chain, this has placed the continent at a significant disadvantage as it continues to import new technology from western markets resulting in import dependency, weak local currency, and endemic poverty.

With the semi-conductor industry hitting a USD 1trillion valuation before 2030; Africa is well able to bolster its economic growth through heavy investment in research and development and local production and processing of its natural resources. This is a sure way to secure competitiveness and relevance.

Africa currently imports the vast majority of its electronic devices, including smartphones, computers, and other gadgets, primarily from Asia and the West.

Africa currently imports the vast majority of its electronic devices, including smartphones, computers, and other gadgets, primarily from Asia and the West.

This heavy reliance on imports not only drains foreign exchange reserves but also perpetuates technological dependency and stifles indigenous innovation. While the continent’s massive youth population continues to feature as key adopters and enablers of the global software innovation culture in the fast-expanding global tech industry, Africa is visibly missing in the Hardware play.

To this end Developing a domestic semiconductor industry would allow African nations to leapfrog technological barriers, reduce reliance on imports, and foster homegrown innovation.

The establishment of a semiconductor industry in Africa has the potential to spur economic growth on multiple fronts. Firstly, it would create high-skilled job opportunities in research, design, manufacturing, and related sectors, thereby addressing youth unemployment and brain drain.

Secondly, it would attract foreign investment and foster partnerships with global tech giants, driving economic diversification and export growth. Finally, it would stimulate a thriving ecosystem of startups and SMEs, catalysing innovation, and entrepreneurship across the continent.

Realizing the vision of a thriving semiconductor industry in Africa requires concerted effort and collaboration from all regional Governments, policymakers, and industry stakeholders. First, governments must enact supportive laws and policies to incentivize investment in semiconductor research, development, and manufacturing. This would include tax breaks and subsidies, further,

the Government must push regulatory reforms to limit barriers to entry, increase access to global capital and facilitate ease of doing business whilst assuring adequate protection of intellectual property rights.

Further, investment in education and vocational training programs, Introduction of related STEM programmes into the curriculum of basic and high schools remain critical to developing a skilled workforce capable of driving the semiconductor industry.

Collaborations between private sector, universities, research institutions, and the Government will also foster knowledge exchange and skill development, ensuring a steady pipeline of talent. Relatedly, strategic government action through public-private partnerships and investment in infrastructure, including reliable power supply and high-speed internet connectivity, is crucial for the establishment of semiconductor fabs and related facilities.

The development of a semiconductor industry in Africa is not merely a technological ambition but a strategic imperative for sustainable development and global competitiveness. By harnessing its abundant human capital, fostering innovation ecosystems, and enacting supportive laws and policies, Africa can chart a path towards technological self-reliance and economic prosperity.

We are an Africa Focused deal advisory/boutique commercial law firm focused on supporting businesses and positioning them to operate efficiently within their market sphere. We are known for our quality service delivery which is focused on attention to detail, creativity, timely execution and client satisfaction.

Our service offering includes: corporate commercial, real estate & construction, finance, capital markets & derivatives, mergers and acquisitions, private equity, infrastructure, technovation and data privacy, agriculture & commodities, business formations & start up support amongst others.

Should you wish to seek specialist legal advice on this or any other related subject, you may contact our Technovation and Data Governance Practice Team;

 

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