Why Africa could provide the next semiconductor ecosystem for the chip business

The recent announcement of a partnership between the US Trade and Development Agency and Kenya to boost semiconductor manufacturing in the East African nation is a long-awaited step toward involving the African continent in global semiconductor supply chains.

This development signals a pivotal moment for Kenya and the African continent, which is beginning to position itself as a critical player in the global semiconductor ecosystem. But it’s just the first move in a much larger game.

Resource-full with burgeoning economies, the continent – particularly East and West Africa – presents opportunities for the United States and the “West” to secure critical supply chains and foster what could become a dynamic new arena in the global semiconductor landscape. Doing so will also strengthen partnerships with the continent in an increasingly complex geopolitical landscape.

The economies of Kenya, Nigeria, Rwanda and Ghana provide particularly fertile ground for investment, innovation and growth in semiconductor manufacturing.

These nations could become critical hubs in a global network that demands resilience and adaptability and as billions of dollars pour into national semiconductor markets, as seen in the United States, South Korea, China and the European Union (EU).

As the United States develops its semiconductor manufacturing capacity domestically through historic direct investments in projects across the supply chain – $327 billion over the next 10 years – there has also been an emphasis on increased coordination with friendly and allied global partners.

This collaboration would help maximize limited resources and capital, buffer supply chains from instability and promote knowledge and information sharing to foster innovation and development of semiconductor technologies.

Reports anticipate that the semiconductor industry will swell to $1 trillion dollars by the end of the decade. As this sector grows, a major dynamic within it is that companies prioritize securing and bolstering their supply chains. These kinds of investments in India, Costa Rica, and Mexico, for example, have shown that it is possible to create a feedback loop where manufacturing capacity increases, the workforce develops and innovation and continued investments are spurred.

Africa is a potential recipient of such gains as well. In the short term, Africa may not be able to manufacture semiconductors but can engage in supply chain activities such as testing, quality control and programming. The growing startup ecosystem, including incubators, accelerators and co-working spaces, provides a network of early-stage businesses and potential employees for these roles.

Additionally, the African diaspora invests in these ventures, exemplified by Ola Fadiran, who has a background in microchip design and Mohamed Kassem’s eFabless, which simplifies chip design.

It is estimated that Africa contains one-third of the critical minerals needed for semiconductor manufacturing and quantum computers cannot be produced without these minerals. Scandium, yttrium, lanthanum and cerium are all elements used in semiconductors and are essential for every stage of chip production, from raw materials to design and fabrication.

These critical minerals are used in consumer electronics, computers, communications, renewable energy, electric vehicles and defence systems. There is a direct opportunity to establish a self-sustaining, end-to-end ecosystem, reducing dependence on other established but potentially volatile sources. These minerals and the semiconductor production they supply are the building blocks of modern technology. Africa’s abundance of these resources places it at a strategic advantage.

In turn, African countries have the potential to see growth and progress, encouraging local value addition through, for example, export restrictions and prioritizing research and development within their borders, which can retain domestic talent and provide jobs in an otherwise hard market for STEM (science, technology, engineering and mathematics) graduates. Nigeria actually rejected Tesla’s proposal to mine lithium in the West African nation as the company was unwilling to establish a manufacturing facility there.

The availability of raw materials locally significantly reduces supply chain risks and costs for producers, including fuel, import/export fees, unforeseen geopolitical events or natural disasters and supplier issues. Africa should thus be seen as an indispensable part of the semiconductor supply chain.

Africa’s value proposition extends far beyond resource extraction, however. Its young and tech-savvy population provides a fertile ground for innovation and design. The potential for collaboration between research centres in Nairobi, Kenya, or Lagos, Nigeria, and established Western firms could lead to further advancements in chip technology.

The unique combination of capabilities in Africa, from raw material extraction to cutting-edge technology production, presents a promising opportunity for global collaboration and the development of a comprehensive semiconductor ecosystem.

Significant investments in education, infrastructure, and technology transform Africa into a hub of innovation and manufacturing excellence. Rwanda and Ethiopia’s efforts in building tech parks and innovation hubs inspire a new generation of engineers and technologists.

In recent years, Kenya has emerged as Africa’s new leader in the technology market by becoming the hub of innovation and technological development on the continent. Innovations in mobile payments, investments in startups, improvements in technological infrastructure, and government support have all contributed to its rise to prominence.

As the costs of the semiconductor value chain continue to rise in established markets, Africa’s competitive pricing and untapped brilliance and innovation offer a promising solution. The continent, known for its stunning landscapes and wildlife, could soon become the Silicon Savannah of semiconductor design and testing, reducing the reliance on China for critical materials.

The economic benefits of investing in Africa are clear but the social and developmental impacts are equally profound. By embracing Africa’s potential, the United States and the West can help foster sustainable economic development, create jobs and spur technological advancements that benefit the world.

The EU’s European Chips Act and the US CHIPS and Science Act provide opportunities for democratic nations to collaborate in strengthening the semiconductor industry to the tune of $500 million in programme money.

African countries can use these initiatives to establish their own legislation, framework and supplier networks to support value addition in processing, chip design, quality control and backend functions, and flash memory or electric battery production. Implementing such policies would reduce the need to export critical materials to China.

The Kenya-US partnership marks a promising beginning for a potential alliance. It highlights the abundant opportunities Africa presents for the semiconductor industry.

However, as global demand for semiconductors increases, Western nations must view Africa as a valuable partner in establishing a strong, diverse, resilient semiconductor ecosystem and supply chain.

Attaining this buy-in requires strategic involvement from African policymakers, the private sector, and the African diaspora to integrate the continent fully into the global semiconductor supply chain and mitigate supply chain risks.

Collaborating and utilizing each region’s unique strengths will aid technological advancement. The time has come for Africa to shine in the semiconductor field with the global community’s attention.