UK’s £1bn chip investment ‘a drop in the ocean’ for semiconductor industry

The UK government has announced a £1bn investment in the domestic semiconductor industry – a sum “far short” of commitments made by the US and EU.

The National Semiconductor Strategy announced by the government has pledged £200m into the UK semiconductor industry between 2023-25, and £1bn over the next decade. 

However, analysts warn this is inadequate compared to investments seen in other parts of the world. The US announced it is committing $53bn to its semiconductor production as part of its CHIPS Act, while the EU has granted €43bn to its own strategy, and China is intending to spend $143bn on its own chips support package.

Tech and semiconductor analyst Counterpoint Research’s senior analyst, Yang Wang, told Supply Management the announcement was a “disappointment” given the high profile the semiconductor strategy had been given over the past two years.

Wang said: “£1bn over the next decade presents a drop in the ocean and is unlikely to elevate UK’s standing in the global semiconductor value chain.” 

However, Wang said there are notable advantages to the strategy. The investment – which only fully commits to £200m over the next three years, with the remaining £800m subject to review – focuses on the UK’s areas of expertise, namely chips design, R&D and IP commercialisation.

It focuses on getting research institutions better access to infrastructure, and grants particular attention to compound semiconductors – a type of device useful for automotive and industrial applications, but different from the “cutting-edge” chips used in smartphones.

Wang said: “This is a sensible approach as it helps relevant industries in the UK, such as robotics, defence, aerospace and advanced telecoms. Given the state of the UK’s semiconductor industry, the macro headwinds and the niche areas that the UK is good at but needs support, overall speaking the programme is a sensible one.”

Intellectual property law practice EIP’s semiconductor analyst and partner, Andrew Thompson, agreed that the commitment of £200m over the next three years was a “drop in the ocean”, but said the “devil will be in the details”.

He told SM: “It’s all going to depend on what initiatives they're going to support in terms of skills training, in terms of software platforms to try out new technology, in terms of the prototyping facilities,” Thompson explained.

He argued that the figures cannot be compared to the size of the investment seen in the US, as the country already has an established semiconductor industry. 

“We can't really compare with the US, because their semiconductor industry is on another level compared to our own. So inevitably, our numbers are going to be much smaller. 

“But still, I think the numbers seem a bit lower than we were expecting. I would rather be focusing on, how are they going to allocate this money?”

Thompson said a key aspect for the industry as it moves forward will be collaboration and relationship-building with other countries, such as a recently-signed agreement with Japan for research and development into semiconductors. 

Additionally, in order to reach “parity” with the investments other countries were putting into their semiconductor industries, the UK needs to attempt to match, if not absolute prices for investments and subsidies, then percentages of funding. This, Thompson argued, is key to making the UK “an attractive place for semiconductor companies to do business.”

MP for Manchester Central, Lucy Powell (Lab), criticised the announcement, saying: “Behind the £1bn headline, the reality is £200m over the next three years – significantly less ambition than our competitors.”

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