VIDEO Last month, Xanadu announced plans to transform part of Toronto’s former Campbell Soup factory into an advanced manufacturing facility for quantum computing . Supported by a $195-million federal investment, the facility will manufacture photonic components, package and test chips, and assemble hardware for its next generation of quantum computers.
There is something fitting about the location. Campbell opened its Toronto factory nearly a century ago and eventually shifted production to the United States. Now, part of that same industrial site is being repurposed to manufacture one of the world’s most advanced emerging technologies.
The significance goes beyond Xanadu or quantum computing. It points to a larger opportunity for Canada — one we might think of as a combination of Canadian Resilience and Canadian Dynamism.
Canadian Resilience is our existing physical capacity: the people, plants, shipyards, aerospace and industrial clusters, the mines and energy infrastructure built over decades without fanfare. You cannot shortcut a mine or a factory with a software layer.
Canadian Dynamism is what gets built next, on top of that base: the science, the universities, the AI and quantum research, and the globally competitive companies that come out of them, plus the decision to aim Canadian capital at the frontier markets that matter. Resilience is the capacity we already have. Dynamism is deciding how to use it.
Canada has spent decades trying to solve two familiar problems: commercialization and productivity. We have been better at producing the science than at turning it into large companies. At the same time, Canadian productivity has persistently lagged that of our peers.
The next technology era gives us an opportunity to address both.
Artificial intelligence provides a cautionary example. Canada helped pioneer modern deep learning through researchers including Geoffrey Hinton, Yoshua Bengio and Richard Sutton. Canadians built a disproportionate share of the science. Much of the commercial value accumulated elsewhere.
This time may be different because the technology economy is becoming physical again. There is a name for what happens next: Physical AI.
Physical AI is the next wave of intelligence: a model, a physical form factor and the manufacturing required to bring them together. For the last several years, the AI boom has been overwhelmingly digital: software, a model, an app, a chatbot. Physical AI is the model that actuates a robot, a machine, a vehicle, an aircraft, a production line. Scaling these technologies requires not only computing but electricity, energy, materials, manufacturing, supply chains and physical infrastructure.
Software and AI models can be built anywhere and moved everywhere. The full Physical AI stack cannot. It needs factories, metal, supply chains and people who know how to build at scale. Canada does not need to learn that skill.
Canada has world-class expertise in AI and quantum science alongside strengths in energy, mining, aerospace and advanced manufacturing. Characteristics of the Canadian economy that looked like liabilities in the software era may become advantages in this one. And perhaps nowhere is the opportunity greater than on the shop floor.
AI-enabled machines can inspect products, optimize production lines, predict failures and work alongside skilled workers. For a country facing productivity challenges, an aging workforce and skilled-labour shortages, applying Physical AI across Canada’s physical economy is an economic imperative.
Canada therefore has two opportunities: build globally competitive companies creating these technologies and become an early adopter across our existing industrial base.
Done well, those objectives reinforce one another. Canadian factories, mines and industrial facilities become customers and proving grounds for Canadian technology, and Canadian industry becomes more productive in the process. That feedback loop is Canadian Dynamism in practice.
For policymakers, these opportunities require a shift in thinking. Innovation policy cannot end when research is funded or a startup is created. Where Canada has a genuine advantage, policy must also consider the customers, infrastructure, procurement and financing required to turn intellectual property into globally competitive companies. It must encourage Canadian industry to adopt those technologies as well.
Capital also needs to evolve. Physical technology often requires significant investment before producing predictable cash flow. Canada therefore needs more than venture capital. Government can support research and become a demanding early customer through procurement. Venture and growth investors can take technology and commercial risk. Equipment financing, loan guarantees and institutional capital can finance production and expansion as companies mature.
That is the specific thesis here: capital cannot fund the AI and call it done. In these markets, it needs to fund all three layers: the AI itself, the hardware it runs through and the domestic manufacturing capacity to build that hardware at scale. The real differentiation comes from the third.
At Georgian, we have seen the value of public-private partnership firsthand. More than a decade ago, we were among the first private-sector partners to work with the federal government through what was then known as the Venture Capital Action Plan, helping mobilize private capital into Canada’s venture ecosystem.
Today’s challenge is different, but the lesson remains relevant. Government and private capital have different but complementary roles. Neither can do this alone.
Canadian investors need to raise their ambitions too. We cannot consistently wait until our best companies are fully de-risked or being courted by foreign buyers before we are willing to put Canadian capital behind them.
That brings us back to the old Campbell Soup factory.
A former soup factory becoming a quantum manufacturing facility is not an industrial strategy. But it is a useful symbol of what one could look like: Canadian science becoming Canadian intellectual property, attracting private and public capital, and ultimately becoming sophisticated production capacity built here for global markets.
Canada has already proved it can invent the future.
We have the resilience. The opportunity now is to turn it into dynamism: financing more of the future here, building more of it here, applying more of it across our economy and retaining more of the value when the world comes to buy it.
Simon Chong is the co-founder of Georgian Partners. Disclosure: Georgian has been an investor in Xanadu (Nasdaq/TSX: XNDU) since 2019.
