UK Unveils £1 Billion Semiconductor Strategy

A closeup of a silicon wafer on display at Taiwan Semiconductor Research Institution in Hsinchu, Taiwan, on Sept. 16, 2022. (Annabelle Chih/Getty Images)

The UK government has unveiled its semiconductor strategy, which it said would secure the country’s position as a “global science and technology superpower.”

But the long-awaited policy paper was met with mixed reactions, with some companies calling it “flaccid” and lacking in ambition.

Under the 20-year plan, the government pledged around £200 million ($248 million) by 2025 and up to £1 billion ($1.2 billion) over the next decade to boost domestic capabilities.

The strategy also includes plans to attract and nurture talent, strengthen ties with major chip-manufacturing countries, and help businesses navigate supply chain risks and national security laws.

Most of the £1 billion will be spent on encouraging research and innovation, with parts of the money to be used to boost relevant subjects in schools and international collaboration projects.

The amount of investment is dwarfed by United States’ £42 billion ($52 billion) incentive packages and the European Union’s £37 billion (€43 billion) state aid to encourage domestic manufacturing.

The UK government said it will announce plans by the autumn on how to support the “competitiveness” of its domestic manufacturing sector and keep evaluating future needs for domestic manufacturing, but the strategy is mainly focused on more advanced compound semiconductors, research and development, and chip design.

Prime Minister Rishi Sunak departs 10 Downing Street to attend Prime Minister's Questions at the Houses of Parliament, in London, on April 26, 2023. (Stefan Rousseau/PA Media)

Prime Minister Rishi Sunak said in a statement: "Our new strategy focuses our efforts on where our strengths lie, in areas like research and design, so we can build our competitive edge on the global stage.

“By increasing the capabilities and resilience of our world-leading semiconductor industry, we will grow our economy, create new jobs and stay at the forefront of new technological breakthroughs.”

Supply Chain Risks

Semiconductors, commonly known as microchips, are essential components of all things modern from cattle tags, smartphones, and cars, to medical equipment, power stations, and weapon systems.

Owning to the complexity of semiconductor manufacturing, chip fabrication can cost upwards of £10 billion, and the whole process of making them—from mining minerals and designing the chips, to the making and packaging—is scattered around the world.

Most advanced semiconductors are produced in Asia, with Taiwan Semiconductor Manufacturing Company (TSMC) and South Korea’s Samsung leading the charge.

A man walks past a company logo at the headquarters of the world's largest semiconductor maker TSMC in Hsinchu, Taiwan, on Jan. 29, 2021. (Sam Yeh/AFP via Getty Images)

Concerns over semiconductor supply chain security were brought to the fore after a global shortage during the COVID-19 pandemic hit many downstream industries including the automotive sector. Geopolitical tensions—particularly anxieties over a potential Chinese invasion of Taiwan and Beijing’s ambition of technological dominance—are also prompting countries to mitigate supply chain and national security risks.

To help improve the industry’s access to infrastructure, the government said its short term plans include a pilot programme to support new start-ups, a campaign to attract foreign talent, and investment in teachers in subjects such as maths and physics.

The paper also included medium- and long-term goals including supporting research centers to recruit and train talent, expanding the UK’s compound “open foundry’”ecosystem, improving access to chip design tools or IP and prototyping facilities for silicon, and exchange programmes with allies including Japan.

To mitigate risks of another supply chain shock, the government said it will talk to companies to better identify risks and publish guidance to help smaller businesses that depend on semiconductor components to understand where the potential risks are and measures they can take.

The government vowed to work with Taiwan, Korea, Japan, and the United States on supply chain resilience and transparency and to help preserve freedom of navigation through the Indo-Pacific region to deter Beijing’s blockade in areas such as the Taiwan Strait.

Regarding risks to national security, the document set out plans to address supply chain risks to critical industries such as health care, defence, and telecoms.

The government also said it would increase transparency when banning foreign investments or exports using national security laws, to help business navigate the rules, but will continue to make decisions on a case by case basis as new technologies and threats emerge.

‘Fundamental Challenges’ Not Addressed

Americo Lemos, CEO of chip maker IQE, said in a statement that the strategy “rightly focuses on the areas where the UK is a global leader, such as the manufacturing of advanced compound semiconductors sitting at the heart of future technologies.”

Simon Thomas, CEO and founder of Paragraf, which describes itself as “the only company in the world capable of manufacturing graphene to mass produce semiconductor chips,” said the strategy, although welcome, is “quite frankly flaccid” and “a long way from addressing the needs of UK chipmakers.”

It doesn’t address “any of the fundamental challenges British chipmakers face,” he said in a statement emailed to The Epoch Times.

Noting the strategy is ultimately “not about the money,” Thomas said the government’s spending commitment is “nothing but a rounding error in this industry.”

“The strategy should be a plan on how the government will remove the barriers for growth resulting in an environment where British semiconductor businesses can flourish,” he said.

“From what we’ve seen so far, while not addressing any of the fundamental challenges British chipmakers face, the strategy continues the trend of this Conservative administration proclaiming superlatives like ‘becoming a technology superpower’ without defining what ’superpower' actually means or delivering a plan of how we will even begin to reach this objective.”

Amelia Armour, partner at Amadeus Capital Partners, which invests in semiconductor start-ups, also said the the government’s ambitions were “lacking.”

She told the Financial Times the scale of investment is “disappointing” compared to the EU and the United States.

The initial commitment of £200 million “won’t achieve much” unless it’s used “in a very targeted way,” she said.