UK chip sector 'at risk' and needs state support

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The UK is missing out on a wave of inward investment and falling behind other countries when it comes to its semiconductor industry, and it is not being helped by a lack of support from the government.

These are the findings of a newly released report from MPs on parliament’s business committee who have also called for the government to urgently publish a long-delayed semiconductor strategy.

Making international partnerships was something to be explored and, according to the committee’s report, the UK government should be looking to secure partnerships with strategic allies to secure lucrative inward investment in the UK semiconductor industry and singled out cooperation with the US under the CHIPS Act and engagement with Taiwan as possible areas that could yield opportunities for the industry.

The UK is heavily dependent on companies in other countries when it comes to sourcing semiconductors and the report warns that this is unlikely to change unless the government improves levels of support.

Committee Chair Darren Jones said, “The government is putting UK plc at significant risk by failing to take action in support of the semiconductor industry. Other countries are investing in the resilience of their semiconductor supply chains yet ministers in the UK can’t even publish their semiconductor strategy on time.”

The semiconductor strategy document was due to have been published earlier this year, but the government is now declining to say when this will occur.

Semiconductors are essential components of modern technology and in the infrastructure required to reach net zero and high growth is expected in the coming decades, which is an opportunity for the UK to leverage its strategic ‘lead’ in areas such as design and in energy-saving compound semiconductors.

As an example of government confusion over the industry Jones pointed to the decision to require Nexperia to divest from its Newport site. “Ministers must now proactively engage with potential buyers to secure the future of our vital semiconductor cluster in South Wales,” he warned.

The report’s findings suggested that ‘it is not clear that the support currently offered by the government is at anything like the scale which is needed to make a difference’.

It also said that the UK’s semiconductor strategy should include ‘facilitating the design and construction of new fabs’ and it also suggested the development of an ‘open fab’ in South Wales, should be considered.

Concerned by a worldwide shortage of semiconductors following Covid-19 lockdowns, governments across the world, particularly in the US and Europe, have been ploughing tens of billions of dollars into semiconductor investment, including establishing new fabs.

Globally, the semiconductor industry is worth more than $500bn and, despite a recent dip in demand, is expected to expand to over $1tn by 2030. 

In response a government spokesperson said, “We are committed to supporting the UK;s vitally important semiconductor industry. We are reviewing our domestic capabilities and working closely with industry and international partners to develop a new semiconductor strategy which will be published as soon as possible.”