Chair of UK SLG issues warning to Government over UK chip industry

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Comprising of executives from across the UK semiconductor industry and supported by TechWorks, the UK’s Deep Tech Trade Association, the Semiconductor Leadership Group (SLG) provides a voice for the semiconductor industry and engages with the UK Government.

Chaired by TechWorks’ CEO Charles Sturman along with executives from leading chip technology firms including Bourns, Clas-sic, Imagination, Paragraf, Plessey, Pragmatic and XMOS the group has released a paper ahead of the Chancellor’s Autumn Statement that urges the Treasury to find effective mechanisms to support the UK semiconductor manufacturing sector.

The group is calling on the Government to ensure that the UK’s chip industry can continue to compete globally, even whilst many international competitors are subsidised.

In the paper, they argue that UK chip manufacturers need a level playing field to compete globally and this means, as a minimum, a support mechanism for capital expenditure and access to finance for the necessary step-up expenditure to remain competitive.

Although the UK does not try to compete with ultra-high volume chip manufacturers in the Far East, it does possess a number of world-leading companies exporting millions of chips in important new markets such as power electronics for EVs & renewable energy, 5G radio communications, photonics for augmented reality and high-performance computing and MEMS (nanoscale structures) for sensors in life science, automotive & robotics. 

To scale and maintain their lead, these companies must periodically upgrade and enhance their facilities. However, the long-term, capital-intensive nature of chip manufacturing coupled with the lack of market understanding in finance markets make these investments difficult to obtain from traditional investors, according to the paper, even though in the long term, such companies often grow to be highly successful if they can maintain their lead through appropriate investments.

The Government semiconductor strategy published in May stated, "We will announce plans by the autumn to further support the competitiveness of the semiconductor manufacturing sector that is critical to the UK”.

In their paper, the Semiconductor Leadership Group aims to provide industry input into this planning and support HM Treasury in securing the future of this important industry sector.

Ahead of the Chancellor’s Autumn Statement, the group proposes that the Treasury:

  • Change capex rules for Innovation and R&D schemes (UKRI and R&D Tax Credits) to allow significant capex recovery when investing in strategic enhancements to semiconductor manufacturing.
  • Increase the maximum funding available from UKRI / InnovateUK for specific semiconductor manufacturing enhancements to ensure the UK business can remain globally competitive.
  • Create a matched funding or lead investor scheme in support of strategic upgrades to UK facilities where applicable companies can demonstrate the ability to lead globally through such enhancements.
  • Address the shortage of process engineers, technicians and operators through apprenticeship system reform, offering employers more flexibility in how they use their Apprenticeship Levy contributions.

Charles Sturman, Chair of the Techworks Semiconductor Leadership Group, commented,” The Chancellor’s Autumn Statement is an opportunity for the government to show that it recognises the challenges faced by the UK’s semiconductor manufacturing sector and to propose meaningful interventions in support of this strategic industry, as indicated in the strategy.”