Securing the Future: Why the UK Must Act Now to Lead in the Semiconductor Industry

The UK semiconductor industry is facing a critical turning point, with the organization techUK calling on the government to take decisive action to maintain its competitive edge on the global stage. According to Laura Foster, techUK’s Associate Director of Technology and Innovation, the UK has a unique opportunity to excel in the semiconductor sector, but this will require bold initiatives and unwavering commitment to progress.

The global semiconductor market is expected to reach $1 trillion by 2030, underscoring the importance of safeguarding the UK’s historical leadership in this vital industry. Foster emphasizes that prompt action is essential to ensure not only the semiconductor industry’s success but also the UK’s technological and economic resilience.

Strengths and Challenges of the UK Semiconductor Industry

The UK boasts a rich history in semiconductor design and intellectual property, particularly in regions like Cambridge, which has become a global innovation hub. Companies like Arm, whose chip designs power 99% of smartphones worldwide, exemplify the UK’s significant contributions. However, despite these strengths, a recent techUK report highlights that insufficient investment, skill shortages, and a lack of dedicated support jeopardize the sector’s future.

The report asserts the UK is not starting from scratch, with competitive capabilities in design and intellectual property. However, for the UK to remain a formidable player internationally, it must leverage these strengths further.

In 2021, the UK semiconductor sector generated £12 billion in turnover, with 90% of businesses anticipating growth. Nonetheless, challenges such as high operational costs, limited domestic capital access, and dependency on foreign talent persist. Currently, only 5% of funding for semiconductor startups in the UK originates domestically, marking a significant hurdle for many companies seeking investors.

Strategic Investment and Innovation Needed

The report recommends 27 initiatives across six key areas, including design, research and development, manufacturing, skilled workforce, and international partnerships. Key proposals include:

• Building on existing strengths: The UK should utilize its capabilities in design and IP, particularly in regions like Cambridge and South Wales, known for their innovative track records.

• Creating a National Semiconductor Centre: This facility would serve as a hub for industry support, coordinating research efforts, and promoting collaboration between academia and the private sector.

• Enhancing R&D tax credits: By including capital expenditure in these credits, the UK can incentivize investment in new technologies and facilities.

• Establishing a Design Competence Centre: This would provide joint facilities for chip designers, reducing financial risks associated with innovation and aiding in developing advanced designs.

• Addressing skills shortages: Initiatives must be undertaken to upskill the existing workforce, attract global talent, and promote STEM education.

• Forming global partnerships: To solidify its role in the global supply chain, the UK should forge alliances with allied countries to enhance collaborative efforts in R&D and secure access to essential materials.

Urgency for Action

The report warns that without swift action, the UK risks lagging behind countries like the US, China, and the EU, which have significantly invested in their domestic semiconductor industries. The European Chips Act, for instance, has pledged €43 billion to bolster its semiconductor framework.

Global governments are mobilizing quickly to attract semiconductor firms while simultaneously building local capabilities. The UK must strategically utilize its existing resources and capitalize on its recognized strengths within the semiconductor value chain.

With the right investment, planning, and collaborative efforts between the government, industry, and academic institutions, the UK semiconductor sector could reclaim its status as a global leader. The report concludes by urging the UK government to view its semiconductor ambitions as integral to realizing broader industrial strategies and achieving sustainable economic growth.

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