LONDON – Britain’s semiconductor industry is crying out for financial support from the government, with insiders warning the country risks losing microchip companies to the US and other countries if it doesn’t act soon.
Prime Minister Rishi Sunak’s government has yet to announce a strategy outlining Britain’s efforts to support the chip industry. And the country’s semiconductor bosses are getting frustrated.
Pragmatic Semiconductor, a Cambridge-based startup that produces non-silicon chips, has warned it could be forced to move overseas if the government does not release plans for the industry.
“It has to make economic sense for a company like us to continue to operate and manufacture here, and if there are greater potential economic benefits and government support packages overseas, then relocation is the only sensible business decision,” Scott White, CEO of Pragmatic Semiconductor. , told CNBC.
The UK is an understated player in the global chip market, specializing in the design, intellectual property, research and fabrication of compound semiconductors.
It also happens to be one of our favorite semiconductor-related assets in the form of chip designer Arm. Based in Cambridge, England, Arm-licensed chips are used in approximately 95% of the world’s smartphones.
Semiconductors, and their supply chains especially in East Asia, have become a difficult issue for world governments after global shortages caused problems for automakers and electronics manufacturers.
The Covid-19 pandemic has shown an over-reliance on manufacturers from Taiwan and China for semiconductor components. That dependence has been exacerbated by tensions between China and Taiwan.
TSMC, the Taiwanese semiconductor giant, is the largest producer of microchips. Its chip-making prowess is the envy of many developed Western countries, which are taking steps to boost domestic chip production.
IQmicrochip companies in the semiconductor “cluster” in Newport, Wales, have also been warned they could be forced to move to the US or the EU if the government does not act in the next six months.
“We’re happy to stay in the UK and we’re committed to growing in the UK … but we also have to do what our shareholders want and go where the money goes,” Americo Lemos, CEO of IQE, told The Times newspaper.
A UK government spokesman was not immediately available for comment when contacted by CNBC.
In the US, President Joe Biden signed into law the CHIPS and Science Act, a $280 billion package that includes $52 billion in funding to boost domestic semiconductor manufacturing.
The European Union, meanwhile, has earmarked 43 billion euros ($45.9 billion) for the European semiconductor industry with the goal of producing 20% of the world’s semiconductors by 2030.
China, too, has been forced to revamp its chip strategy after facing tough trade sanctions from the US In December, the country said it was preparing more than 1 trillion yuan ($147 billion) of packages for its chip industry, according to Reuters.
‘An act of national self-destruction’
UK tech industry executives say the lack of a similar strategy from the government is undermining the country’s competitiveness.
Britain may not have the kind of financial firepower to match a bold spending package, he said. However, he hopes the country will invest in millions, tax incentives, and an easier immigration process for skilled workers.
“The pursuit of catch-up is not within the UK’s spending power, not even remotely,” Simon Thomas, CEO of Paragraph, a British company developing and producing graphene-based electronics, told CNBC.
On February 3, MPs 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.”
The government’s BEIS agency was disbanded on Tuesday and replaced by a reshuffle from Prime Minister Rishi Sunak.
The business and industrial strategy portfolio is now under the authority of Kemi Badenoch, minister of the newly formed Department of Business and Trade, while the Department of Science, Innovation and Technology is headed by Michelle Donelan.
Sunak became Britain’s prime minister for the third time last year, inheriting the bleak economic background of his predecessor Liz Truss.
He was under pressure from the chip bosses to outline a strategy for the industry – and quickly.
Russ Shaw, founder of London Tech Advocates, says the government needs to “step up.” London has been “inordinately distracted by chaos.”
The British semiconductor strategy was expected to come out last year. But it has faced some delays due to political instability. The previous administration proposed the creation of a national institution, among other initiatives, to promote the semiconductor industry.
“The rumor I heard is [it may arrive] anytime now,” Chris Ballance, co-founder of British quantum computing startup Oxford Ionics, told CNBC. However, he added that the process has been “going on for four or five months.”