The UK is in urgent need of a strategy to bolster its semiconductor industry, bosses of some of the country’s biggest chip companies have told City A.M.
Maintaining a steady supply of semiconductors will be critical to the electric vehicle transition and roll out of 5G infrastructure.
The long-awaited strategy is expected to be published this autumn, although it may well be pushed back.
While the UK government has been dragging its heels, other countries, most notably the US, Europe, China, Korea and Taiwan, are much further ahead, having heavily invested in their respective chip makers.
The US Chips Act, passed earlier this month, includes $52bn worth of support for any semiconductor businesses operating in the US. The EU Chip Act, launched in February, hosts around $49bn worth of investment into the sector. And China dwarfs them both, boasting over $130bn worth of state and private funds to be issued out between 2020 and 2025.
The UK, on the other hand, is desperately lacking inward investment in its semiconductor industry, from both state and private sector.
UK industry bosses are hoping for a clear and unambiguous plan for the semiconductor sector, which will clarify key questions such as whether the country will look to become a semiconductor-manufacturing hub or expand its already successful niche of chip design.
But the industry will only be able to attract private investment once the roadmap becomes clear.
Investment will be the primary driver to competing on the global stage, said Tim Pullen, chief financial officer at British semiconductor company IQE, as other governments look to lure businesses with subsidies and other attractive incentives.
“How did Taiwan, Korea et cetera, get that lead? They invested heavily,” Pullen told City A.M. “Our hope is that the UK government will do the same for our industry… The only way you play seriously is when you have seriously large-scale facilities.”
The UK doesn’t even need to match the level of investment seen in the US and Europe, bosses argue.
But any investment must be targeted in the areas the UK has an advantage in, such as compound semiconductor design, instead of making silicon-based chips, which other countries, such as the US and Taiwan, already have a lead in.
David Harold, chief marketing officer at UK semiconductor design firm Imagination Technologies, said that he hopes to see expanded R&D tax credits to tempt firms to operate in the UK.
One door to knock on
Industry chiefs are also calling for one point of contact for businesses with queries about the country’s chip sector.
Simon Thomas, chief executive of graphene-based semiconductor startup Paragraf, said that the number of government entities currently involved in decisions regarding the semiconductor industry is “confusing,” with both the Department of Culture, Media and Sport and the Department for Business, Energy & Industrial Strategy responsible for overseeing the sector.
He said the government should create a “targeted board of advisers to specifically deal with the semiconductor questions.”
Toni Versluijs, UK managing director at Nexperia, also told City A.M. that the industry needs one person or group to contact, “so both parties know of each other, what’s cooking, what’s required” and do away with the current “fragmented” approach.
Time is running out
While there are several critical points that the strategy must get right, it needs to be published soon.
“It has to be this year,” Pullen told City A.M. “Because if you look at what other countries are doing, they have their strategies ready and they’re moving into the investment phase.”
If the strategy is done right, the benefits could be huge.
A solid blueprint for industry’s future could create numerous high productivity jobs “at a time when a lot of people are thinking about the next steps for the economy,” said Pullen.
Thomas said it is feasible the UK could net significant inward investment from companies that want to diversify away from China and Taiwan as geopolitical tensions escalate.
Done wrong, the UK risks losing the industry it has.
Paragraf CEO Thomas revealed earlier this year that he had been approached by an American governmental body trying to lure his business to relocate Stateside.
“Most people who know me, know how passionate I am about growing a UK business,” Thomas noted, before cautioning that if the environment in the UK fails to improve, then his company will be “left with no other choice” but to explore other options overseas.
If the strategy falls through on clarity, investment and other incentives, the government can ultimately expect to “scare away” activities already in the UK, Versluijs said.
“If those conditions are not met, then the UK semiconductor activities will gradually fade away.”
A DCMS spokesperson said: “The Government is committed to supporting the UK’s semiconductor industry and is reviewing our capability and working closely with the industry so we can grow the sector and ensure greater supply chain resilience. Our strategy will be published later this year.”