UK Unveils $1.2 Billion Strategy to Invest in Domestic Semiconductor Industry
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Loading... - Andrea Ross
- 23 May 2023
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The United Kingdom has committed £1 billion ($1.24 billion) to strengthen its domestic chip sector over the next ten years, presenting a highly anticipated plan to compete in the global market for semiconductors.
This investment represents a fraction of the funds pledged by other governments in response to supply chain disruptions caused by the pandemic, which highlighted the world's dependence on Asia for chips utilized in various devices, including mobile phones, laptops, and home electronics. In recent months, the United States and the European Union have allocated approximately $50 billion and €43 billion ($46.3 billion) respectively, to stimulate manufacturing within their respective regions.
The UK's approach involves targeting specific areas of the semiconductor industry where the government believes the country possesses a comparative advantage. Rather than engaging in direct competition with nations that are injecting significantly larger sums into the industry as a whole, Prime Minister Rishi Sunak stated, "Our new strategy focuses our efforts on areas where we excel, such as research and design."
The global chip supply disruptions caused by COVID-19 restrictions triggered a race among major economies to secure inventories, protect proprietary technologies, and enhance domestic semiconductor production capabilities. The United States, in particular, has actively countered China's efforts to advance its semiconductor technologies by imposing restrictions on American companies supplying certain equipment and services to the country.
The UK's Department for Science, Innovation, and Technology announced that the government's investments will concentrate on research and semiconductor design. Arm Ltd., a highly regarded chip designer owned by SoftBank Group Corp., is already located in Britain. Additionally, the UK is focusing on compound semiconductors, which are composed of element combinations that possess promising properties for emerging technologies like 5G, electric vehicles, and facial recognition.
The government emphasized that this investment will foster the growth of the domestic sector, safeguard national security, and mitigate the risks associated with supply chain disruptions. However, it acknowledges that the most critical silicon chips for day-to-day applications will still come from overseas, particularly from Taiwan, which is home to the leading chip supplier globally. The UK intends to "strengthen its collaboration with close partners to develop supply chain resilience."
The UK's total funding commitment over the next ten years is less than what Taiwan Semiconductor Manufacturing Co. Ltd., the world's leading chip foundry company, spends in just two weeks.
The UK government has faced mounting pressure to articulate a strategy as other countries take assertive measures to secure their own chip supplies. Meanwhile, signs have emerged that the UK's own industry is increasingly falling under foreign ownership. For instance, Arm decided to go public in the US instead of London. In 2021, US chip giant Intel Corp. announced to the BBC that it had ruled out the UK as a potential location for a new plant due to Brexit.
Lucy Powell of the opposition Labour Party criticized the strategy, stating that it would be "met with disappointment due to its lack of ambition." She argued that following Arm's decision to list in the US, "This strategy provides little assurance that we can maintain and expand an industry crucial for growth and national security."
