UK Semiconductors Ltd.

The Lords look to the Autumn Budget for details on the future of the National Semiconductor Strategy

In May, the UK Government published its National Semiconductor Strategy, calling the tiny bits of silicon “one of the five technologies of tomorrow”, and thus demonstrating that they are still living in yesterday.

They also claimed to be “clear-eyed about the risks” facing semiconductor supply chains, from the military threats to Taiwan to the potential for future pandemics to shut down international assembly lines.

Therefore, the UK Government launched its UK Semiconductor Infrastructure Initiative, “investing up to £200 million into our semiconductor sector over the years 2023-25 and up to £1 billion in the next decade”, and launching a new UK Semiconductor Advisory Panel, made of industry experts, Government officials and academics.

The strategy had three aims: grow the domestic sector, mitigate supply chain disruptions and protect national security.

It conceded that: “The UK does not have a significant share of global silicon semiconductor manufacturing and… is better positioned to pursue alternative opportunities within the sector as opposed to building advanced silicon manufacturing capabilities to rival those in East Asia.”

Therefore, the strategy lays out a focus on the UK’s “strengths in research and development, design and IP, and compound semiconductors”, as well as defensive measures through the “National Security and Investment Act and export controls — to protect the most sensitive UK semiconductor companies and technologies.”

The strategy published in May promised that the Government would “announce plans by the autumn to further support the competitiveness of the semiconductor manufacturing sector that is critical to the UK tech ecosystem or the UK’s national security”.

Well, summer is definitely over, but no such plans have been forthcoming, and with the party conference period under way, to be followed by the state opening of Parliament, any plans seem a long way off.

What’s going on?

That’s exactly what Liberal Democrat peer Lord Fox wanted to know when he tabled a question in the House of Lords this week:

”To ask His Majesty’s Government what progress they have made towards engagement with the semiconductors manufacturing sector concerning funding to support future manufacturing in the United Kingdom, as set out in the Semiconductor Strategy, published on 19 May.”

Responding for the Department of Science, Innovation and Technology (DSIT), Viscount Camrose reiterated the claim:

“We will also announce plans by the autumn to further support the competitiveness of the semiconductor manufacturing sector”.

Lord Fox was concerned that the Government’s focus on design and R&D meant backing companies that can easily get bought out or leave the country, whereas only manufacturing could be strategically defended and resilient, but that would require a clear strategy from Government encouraging some of the UK’s smaller, niche manufacturers to expand.

He called on DSIT to pressure the Chancellor ahead of his Budget in November to ensure the Autumn Statement includes “a proper manufacturing strategy for semiconductors in this country”.

Semiconductor designer ARM is a key example of what Lord Fox is talking about. The Cambridge-based company only creates and licenses its technology as intellectual property rather than manufacturing and selling its own physical CPUs, etc.

ARM was once listed on the London Stock Exchange, but was bought out by SoftBank in 2016 and — after a failed sale to Nvidia — earlier this month it was re-floated on the US Nasdaq in the biggest IPO of 2023.

The decision to by SoftBank to go for a US listing in May — just as the UK Semiconductor Strategy was being published — was widely seen as a blow to the UK Government, which had lobbied hard for a UK listing.

The UK does have some semiconductor manufacturing capability, most notably the site known as Newport Wafer Fab. But that, too, is in crisis, after the Government intervened in the sale of the site to Chinese-owned company Nexperia for “national security” reasons in 2022.

The Government’s decision to order Nexperia to divest 86% of its ownership in the Newport facility is currently awaiting judicial review. Until that is resolved, no new owners can be brought in. The slow process and lack of clarity over the future is now threatening hundreds of jobs at the site.

When pressed in the House of Lords this week on the matter, Viscount Camrose could only say:

“Newport Wafer Fab is under judicial review and I cannot comment further”.

While the Government is keen to boast about things like the first ever UK Semiconductors Business Delegation to Taiwan with the UK Pavilion showcasing at the 2023 SEMICON Taiwan, when it comes to the big decisions — the listing of ARM, the future of Newport Wafer Fab — there is silence.

In an interview with the Telegraph earlier this month, Simon Thomas, chief executive of graphene chip company Paragraf, complained that red-tape and bureaucracy in the UK were holding back the semiconductor industry.

He contrasted the treatment he receives in some US states to the UK, where he had to battle against local planners and electricity companies over 12 months, costing £1 million, just to install a power cable to supply a new building at Paragraf’s Huntingdon headquarters.

The UK’s £1 billion package of Government support might be a good start, but it’s nothing compared to the US and the EU.

The Biden administration’s CHIPS Act, which includes $52bn in subsidies, has already tempted UK chip companies including Pragmatic Semiconductor and London-listed IQE to set up US subsidiaries.

Meanwhile, this week Chancellor Jeremy Hunt was in America to woo US tech companies as part of efforts to make Britain the “next Silicon Valley” and boost investment into the UK, ahead of the UK’s “AI Summit”, which will take place in November, just before Hunt deliver’s his Budget.

The semiconductor industry will be hoping that UK semiconductor R&D, design and manufacturing will be part of the Chancellor’s plans, and that the Budget will contain the long-promised details to the National Semiconductor Strategy.