Britain launches $1.2 billion semiconductor plan after U.S. and EU splurge on chips

LONDON — The U.K. on Friday announced up to £1 billion ($1.24 billion) of support for its semiconductor industry, seeking to boost its domestic chipmaking capabilities and prevent further disruptions to supply after cries for help from bosses at some of the country’s leading firms.

The investment will form part of a 20-year strategy on semiconductors — which has faced lengthy delays — outlining the U.K.’s plan to secure its chip supplies and protect against national security risks.

The strategy, which is set to be published later Friday, sets out a range of measures aimed at growing the U.K.’s domestic chip sector, mitigating the risk of supply chain disruptions, and protecting national security.

The U.K. will look to increase cooperation with international partners as part of its strategy. This week, Britain struck a deal with Japan in Hiroshima to boost collaboration on defense and semiconductors.

The government will initially invest up to £200 million from 2023 to 2025 before expanding its commitment to up to £1 billion in the next decade, the government said. The funding will be used to improve talent pipeline and access to prototyping, tools, and business support.

“Semiconductors underpin the devices we use every day and will be crucial to advancing the technologies of tomorrow,” British Prime Minister Rishi Sunak said in a statement.  

“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,” he added.

To prevent disruption from future supply shortages, new guidance will be published informing businesses of the risks of supply shocks, while the U.K. will look to increase collaboration with international partners to improve resilience of the global chip supply chain, the government said.

An advisory panel consisting of figures from industry, government and academia has also been set up to work closely on shared solutions and implementation, it added.

Rather than match some of the mega spending commitments tabled by regions like the U.S. and EU, the U.K. is setting out a different approach that aims to boost the areas it has expertise in.

Officials admitted it wouldn’t make sense for the U.K. to build its own massive fabrication plants, such as those operated by Taiwan’s chipmaking giant TSMC for making the most advanced chips.

Instead, they are focusing on other parts of the semiconductor industry, such as intellectual property and design and producing non-silicon chips.

A U.K. semiconductor strategy was expected to come out last year. But it has faced a series of delays due to political instability. Semiconductor bosses in the country had expressed frustration with the lack of a concrete strategy from the government on semiconductors.

Whereas the U.S. and European Union have pledged billions of dollars in support for their respective chip sectors, the U.K.’s strategy faced delays and setbacks amid numerous changes in government owing to the resignations of former Prime Ministers Boris Johnson and Liz Truss.

Pragmatic Semiconductor, a Cambridge, England-based startup that produces non-silicon chips, warned earlier this year that it may be forced to relocate overseas if the government doesn’t issue a plan for the industry soon. IQE, a microchip firm in the semiconductor “cluster” in Newport, Wales, also warned it may be forced to relocate to the U.S. or EU if the government did not act soon.

Scott White, founder of British chip firm Pragmatic Semiconductor, said the government’s £1 billion pledge — though small compared to that of the U.S and EU — “actually feels like the right kind of number” Britain’s industry needs. However, he cautioned that the funding would need to be “applied in the right way.”

“Equally, if it’s just a repackaging of other things that exist, that won’t be particularly helpful,” White told CNBC earlier this week.

Britain is an understated player in the global chip market, specializing in design, intellectual property, research, and fabrication of advanced compound semiconductors.

It is home to one of the most coveted semiconductor-related assets, chip designer Arm. Based in Cambridge, Arm-licensed chips are used in roughly 95% of the world’s smartphones.

The country is also renowned for its role in developing razor-thin semiconductor wafers made from graphene.

Semiconductors, and the mainly East Asia-based supply chain behind them, have become a thorny issue for world governments after a global shortage led to supply problems for major automakers and electronics manufacturers.

The Covid-19 pandemic exposed an overreliance on manufacturers from Taiwan and China for semiconductor components. That dependency has become fraught with tensions between China and Taiwan on the rise.

TSMC, the Taiwanese semiconductor giant, is by far the largest producer of microchips. Its chipmaking prowess is the envy of many developed Western nations, which are taking measures to boost domestic production of chips.

In the U.S., President Joe Biden signed into law the CHIPS and Science Act, a $280 billion package that includes $52 billion of funding to boost domestic semiconductor manufacturing.

The EU, meanwhile, approved 43 billion euros ($45.9 billion) for Europe’s semiconductor industry with the aim of producing 20% of the world’s semiconductors by 2030.

U.K. lawmakers had said the lack of a similar strategy from the government is hurting the country’s competitiveness. On Feb. 3, lawmakers on the Business, Energy and Industrial Strategy (BEIS) committee called for government action on the semiconductor industry, labeling the lack of a coherent microchip strategy an “act of national self harm.”