UK announces $1.2B chip strategy, faces criticism over funding size

The UK government has finally unveiled its delayed 10-year strategy for supporting the country’s semiconductor industry, which includes £1 billion ($1.24 billion) in  investments to drive research and development efforts and shore up the industry’s talent pipeline.

More than two years after the strategy was first promised, Prime Minister Rishi Sunak announced the policy Friday at a meeting of leaders of the G7 group of nations in Japan, coinciding with an agreement to launch a “semiconductors partnership” between the two countries in order to boost supply-chain resilience.

“Semiconductors underpin the devices we use every day and will be crucial to advancing the technologies of tomorrow,” 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.”

What is the UK’s semiconductor strategy?

Developed in collaboration with industry and academia, the strategy has three core objectives, the Department for Science, Innovation and Technology (DSIT) wrote in a policy paper posted Friday. They include growing the domestic semiconductor sector, mitigating the risk of supply chain disruptions, and protecting national security.

In addition, the department said it would be launching a new UK Semiconductor Advisory Panel, to ensure that government, academia and industry can deliver on the priorities set out in the strategy.

“The UK has strengths across the semiconductor value chain, but possesses three particular areas of strategic advantage — semiconductor design and IP, compound semiconductors, and our world-leading research and innovation system, supported by our fantastic universities,” the policy paper said. Unlike silicon-based chips, compound semiconductors are composed of two or more elements, and can be used to optimize high-performance applications in electronics and optoelectronics.

The policy paper also noted that there are currently around 25 semiconductor manufacturing sites in the UK that process between a few hundred wafers to several thousand wafers per month.

Shoring up domestic semiconductor production

The ongoing global chip shortage and the escalating US-China chip trade war has seen widespread restrictions placed on the export of chips, indirectly causing a number of other countries to get caught in the crossfire. As a result many governments are currently trying to boost their own domestic chip manufacturing capabilities.

While the UK government says the strategy will allow the UK to have a “world leading position” in the semiconductor technologies of the future, the policy has already been criticized for not going far enough, with industry experts pointing out that similar strategies in the US and EU involve $52 billion and €43 billion ($46 billion), respectively, in government subsidies to support domestic chip manufacturing efforts.

Though the UK government appears to have recognized the potential of building on its existing research base to develop its semiconductor sector, there needs to be further clarity around exactly what the £1 billion will be applied to, as well as how and when it will be applied, said Scott White, founder and executive director of strategic initiatives at UK-based Pragmatic Semiconductor, a maker of custom integrated circuits that provide an alternative to silicon-based chips. 

“When you look at the areas the UK is focused on there is a valid question to be asked over whether that’s enough money to make a difference – is it too much of a dilution to spread the amount over 10 years,” he said, adding that the government needs to provide more detail in order to address these concerns.

“Ultimately, you could invest £100 million annually into something that really moves the needle for the industry. You could equally waste £1 billion in a year by focusing it on areas that won’t have an impact,” White said.