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The UK government has unveiled a national semiconductor strategy with funding to support what it sees as the UK’s unique strengths in compound semiconductors, research and development (R&D), intellectual property and design.
Compared with the European Chip Act, which has set aside €43bn of funding until 2030, the UK strategy involves up to £200m investment by 2025 and £1bn in the next decade. The government said the funding would be used to improve the talent pipeline and make it easier for British firms to access semiconductor prototyping and tooling, as well as business support.
Prime minister Rishi Sunak said: “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.”
Along with the funding, the UK’s Department for Science, Innovation and Technology (DSIT) and Japan’s Ministry of Economy, Trade and Industry (METI) announced new R&D cooperation, skills exchanges and an intention to improve the resilience of the semiconductor supply chain for both countries.
UK Research and Innovation will work with the Japan Science and Technology Agency on a joint investment of up to £2m in early-stage semiconductor research next year. This will support UK and Japanese researchers working together on fundamental semiconductor technologies.
Russ Shaw, founder of Tech London Advocates and Global Tech Advocates, said: “It’s important the UK now uses the strategy as a basis to strike up key international partnerships and areas of collaboration with like-minded economies – such as the newly announced partnership with Japan – which will not only strengthen the domestic tech sector, but also bolster the development of British industry more broadly and drive wider economic growth.”
Science, innovation and technology secretary Chloe Smith said the semiconductor strategy would create more skilled jobs, grow the UK economy, boost national security, and cement the UK’s status as a global science and technology superpower.
The strategy has been developed in close consultation with the semiconductor industry and academia. The government has also announced it will be establishing a UK Semiconductor Advisory Panel, which will bring together people from industry, government and academia to work closely on what it describes as “shared solutions and implementation”.
Speaking to the BBC Today programme, Tim Cullen, chief financial officer at IQE, a supplier of compound semiconductor wafer products, described the funding as “a step in the right direction”. He said the strategy recognises the importance of semiconductors to the economy, to national security and to supply chain security, adding: “What we now need to do is work very closely with the government as we move to the execution.”
Compared with the billions the US and Europe have set aside to support their respective semiconductor strategies, Cullen said the UK was taking a different approach. Rather than try to develop home-grown semiconductor manufacturing, which costs billions, he said: “What this strategy recognises is that if the UK focuses on areas where it has particular strengths, we can achieve the same strategic seat at the table in the semiconductor industry but at a fraction of the spend.”
Describing the opportunity to develop an industry around compound semiconductors, Neil Ross, an associate director at TechUK, tweeted: “They are very useful for things like power management, satellites, EVs [electric vehicles], AR [augmented reality] and VR [virtual reality], etc, and the UK should actively be seeking to grow our manufacturing of these chips, which are likely to be in greater demand over the next decade.”
The strategy comes at a time when the UK government is facing a court battle with chip firm Nexperia, after it ordered the company to divest 86% of its share in Newport Wafer Fab. Nexperia said it did not accept the potential national security concerns raised by a review into the acquisition of Newport Wafer Fab.
The UK’s ruling against Nvidia’s $40bn proposed acquisition of ARM, ARM’s decision to list on Nasdaq instead of the London Stock Exchange, and the Competition and Markets Authority’s (CMA) ruling against Microsoft’s $68bn acquisition of Activision Blizzard all demonstrate the friction between the government and the tech sector.
In April, Microsoft president Brad Smith described the CMA’s decision as “fundamentally unwise” and urged the UK government to look at the role of the CMA, which, in his opinion, has damaged the UK’s reputation as a place to invest in technology innovation.
With the European Commission now ruling in favour of Microsoft’s acquisition of Activision Blizzard, there are many who will question how favourably the UK’s regulatory and innovation environment holds up against Europe.
Attracting more talent
There are also questions over the current government policy related to legal migration.
A freedom of information request to UK Visas and Immigration, analysed by audit, tax and consulting firm RSM UK, showed nearly 54,000 international workers migrated to work in the UK’s technology sector in 2022. This was up from 40,000 in 2021 – the largest year-on-year increase in the past five years.
Despite the increase, inbound immigration currently accounts for just 1% of the five million people employed in the UK’s technology sector, suggesting more needs to be done to attract skilled workers from overseas.
However, the government appears under pressure to reduce net migration. According to a number of news outlets, Sunak is now saying that net migration is too high.
Ben Bilsland, partner and senior tech analyst at RSM UK, said: “There are many benefits to skilled migration, including enhancing the wider ecosystem, bringing in more diverse ideas and innovation, and plugging the existing skills gap.”
There are no quick fixes to building out a robust semiconductor industry in the UK. Long term, it is largely recognised that the UK needs to build out home-grown skills. In the short to medium term, skilled overseas workers and researchers offer a way forward. The UK’s approach involves building up skills in maths and physics in schools and bolstering higher education funding in engineering, physics and electronics.
The national semiconductor strategy supports the recruitment of talented engineers from across the world. Businesses based in the UK can make use of visa schemes such as the High Potential Individual Visa, Scale-Up Visa and Global Talent Visa. However, it remains to be seen how highly skilled foreign workers will view the opportunity to live and work in the UK in light of the government’s rhetoric on migration.