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LONDON — The U.K. will invest £1 billion over the next decade to secure semiconductor supplies and boost its chip design sector, Prime Minister Rishi Sunak announced in the early hours of Friday morning.
As POLITICO reported last month, the strategy will focus on the U.K.’s strengths in design and compound semiconductors, where it already has clusters in Cambridgeshire and South Wales — rather than competing with U.S. and EU manufacturing subsidies worth nearly $100 billion.
Semiconductors are needed in everything from iPhones to missiles, but the COVID-19 pandemic exposed the global economy’s reliance on Chinese and Taiwanese manufacturers. The threat of war in Taiwan, home to TSMC, the world’s largest semiconductor company, has triggered a race among the largest economies to shore up their chip supplies.
Around £200 million of the U.K. funding will come between now and 2025, the government said, which will support setting up a National Semiconductor Infrastructure Initiative to “unlock the potential of British chip firms.” A large portion of the investment will be earmarked for building an open foundry for compound semiconductors, one of the industry’s key asks.
Much of the strategy focuses on skills such as electrical engineering and computer science. However, it features no details about immigration or visas for high-skilled workers, despite industry warnings over talent shortages.
Executive director of semiconductor firm Pragmatic Scott White, who has been critical of delays to the strategy, said he looked forward to “working with the government” on implementing it.
But he pointed out it said little about commercial manufacturing, meaning firms like his will have to wait until later this year to find out what incentives they will get to build facilities in the country.
Late to the game
Countries are scrambling to secure supplies amid fears that any Chinese invasion of Taiwan, which produces more than 90 percent of the world’s advanced chips, would disrupt supply lines and have a devastating economic impact.
But the U.K. is late to the game after the U.S and EU announced funding packages last year. It has been working on the strategy for two years but it was delayed by political chaos and wrangling over funding.
Some of the investment is being earmarked for international partnerships. The first is with Japan, where Sunak announced the strategy on the sidelines of the G7 summit on Friday. Whitehall officials believe Japanese strengths in manufacturing complement U.K. specialisms in design.
“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,” said Sunak.
The U.K. is also in talks with South Korea, the U.S. and EU, which are investing tens of billions of pounds in manufacturing.
National security is another key area of the strategy, and it will give more detail to the industry on the areas the government has particular concerns about.
The decision follows criticism of the government for blocking the purchase of the U.K.’s biggest semiconductor plant, Newport Wafer Fab, by Dutch firm Nexperia, whose parent company is Chinese. Nexperia is currently challenging this in the courts.
Industry figures welcomed the strategy’s publication but said they will need to wait longer to see some of its specific asks addressed.
Americo Lemos, chief executive of IQE, which manufactures semiconductors in the U.K., said the strategy “rightly focuses” on the U.K.’s strengths but warned there was “no time to lose.”
Simon Thomas, chief executive of Cambridgeshire company Paragraf, called the strategy “flaccid.” He said the funding commitment “is nothing but a rounding error in this industry” and that the strategy does not “address any of the fundamental challenges British chipmakers face.”
Shadow Secretary of State Lucy Powell said the strategy was not ambitious enough, particularly compared to competitors’ plans. “Following the listing of ARM in the U.S., this strategy offers little assurance we can maintain and grow an industry vital for growth and national security,” she said.
The government plans to set up an advisory panel with “key figures” from industry and academia to work with it on implementing the strategy. Detailed plans for an incubator for startups will be unveiled in the fall.
