UK facing a losing battle in semiconductor growth unless the government acts now

Posted on 14 Apr 2023 by The Manufacturer

The UK government’s long awaited Semiconductor Strategy provides an opportunity to lay out a blueprint to grow this critically important sector that underpins virtually every modern industry.

However, unless it includes a robust plan that includes incentives for capital expenditure, meaningful investment in UK semiconductor companies and drives home-grown revenue opportunities through the targeted use of public procurement, the UK doesn’t stand a chance.

When the government laid out its ambition to become a science and technology superpower by 2030, it was music to the ears of high-growth UK STEM companies. Such a pledge indicated that a wave of government investment and policy initiatives would be forthcoming, and that we would finally start to make the most of the huge potential for innovation and growth that the UK’s science and technology sector firms possess.

The semiconductor industry has huge potential value to the UK, but for that value to be realised, it needs specific and targeted support. A range of unprecedented global challenges have disrupted the sector, causing issues throughout the supply chains that deliver chips to industries such as automotives and electronic appliances, which rely heavily on semiconductors for their products to work.

Governments around the world have reacted swiftly, putting in place clear and robust policies to secure the long-term future of their semiconductor sectors and the industries that rely on them. In the UK, we await with anticipation a similar approach to ensure that our domestic semiconductor companies can compete and thrive on the global stage.

The first job of the Strategy will be clearly defining what role the UK should have in the global semiconductor industry. Whilst catching up with Taiwan and others in silicon semiconductor manufacturing will not be possible, the UK has the opportunity to cement a leading role in more innovative technologies, such as flexible semiconductors – a non-silicon and more sustainable alternative that adds intelligence to everyday objects.

There are three actions the government can take to achieve this.

Firstly, it must create a level playing field with other geographies such as the US and EU, by providing incentives for capital expenditure in order to retain and grow domestic manufacturing in semiconductors. Not only is such manufacturing valuable in its own right, but it also underpins an ecosystem that allows value capture from other IP-rich activities such as chip design.

Secondly, the government can provide support for semiconductor manufacturers to establish and scale their production in the UK by improving the current investment environment. The UK semiconductor industry is at a stage of growth where investment is critical. There’s been progress in providing public funding through the British Business Bank and its venture arm, British Patient Capital; and changes to the insurance industry that will allow institutions to invest is welcomed.  But the scale of investment needs to be bigger. Much bigger.

Lastly, the government should take actions to support innovative new companies through public procurement. By creating home-grown revenue opportunities and, where appropriate, taking the role of ‘first large-scale customer’ for new semiconductor technologies, the government can provide the reassurance and certainty that investors need to support start-ups and scale-ups, as well as reinforcing the business case to maintain manufacturing within the UK.

Annual public sector procurement targets, commitments from public institutions to ‘buy British’, and encouraging public bodies, like NHS Trusts, to explore uses of these technologies, could all play an important role.

These actions would help address both the supply and the demand side of the issue, and ultimately make the UK a more attractive place from which innovative semiconductor companies can build and scale a global base.

The urgency with which the UK’s semiconductor sector anticipates the government Semiconductor Strategy is indicative of both the global challenges it faces and also the substantial potential the sector holds.

The UK has a very real opportunity to be a significant contributor to this global industry, but a well-informed, actionable and appropriately funded strategy is key. I hope the government has the insight, ambition, and boldness to deliver this.

About the author

Scott White, CEO, Pragmatic Semiconductor

Scott is an experienced serial entrepreneur, with Pragmatic being his sixth technology venture. He was also a co-founder and board director at computer vision-based AI company Cortexica, acquired by Zebra Technologies. Past successes include Azea Networks, which he grew from concept to 8 figure sales levels before acquisition. He has lived and worked across the globe including Australia, Japan, Singapore, Indonesia, the US and UK.