UK PM Sunak Plans To Allocate Just £1bn To Semiconductor Industry

UK Prime Minister Rishi Sunak is said to be preparing a £1 billion ($1.24 billion) investment for the country’s semiconductor industry, as chip companies threaten to relocate elsewhere if sufficient government support is not forthcoming.

The British government has dragged its heels over a semiconductor strategy for UK industry, with one promised at least a year ago when Lord Callanan told the House of Commons that the Department for Digital, Culture, Media and Sport was working on one "to be published shortly."

Now, a report from news site Politico claims Sunak will pledge £1 billion for the UK semiconductor sector, and is expected to unveil the long awaited national semiconductor strategy at next month’s G7 summit to be held in Japan.

The report cites anonymous sources said to have direct knowledge of the matter, and says the newly formed Department for Science, Innovation and Technology (DSIT) has pushed for a larger amount of funding in light of the much bulkier sums being allocated to chip companies in other parts of the world.

In the US, for example, the Biden administration is already well advanced with plans under the CHIPS Act to distribute $52 billion in subsidies and other incentives to encourage semiconductor companies to build their fabrication plants there, and to boost research into chip technologies and workforce education.

The European Union has also just finalized its own plans for a European Chips Act with similar goals, which is set to unlock €43 billion ($47 billion) in funding for the semiconductor industry across the EU, with the aim of doubling the current market share of the global chip market represented by European companies.

Japan is set to pump 330 billion yen ($2.47 billion) alone into one new semiconductor company named Rapidus, which aims to develop and mass produce advanced 2nm semiconductors.

By contrast, it is claimed that Britain’s strategy is likely to focus on how to scale up existing chip design and manufacturing companies, secure supply chains and address skills shortages, rather than joining the global subsidy race, which may go some way to explaining the paltry sum.

“The UK does not have a semiconductor industry of any consequence from a size point of view (and never will have) so there is absolutely no point in announcing tens of billions in support,” said Richard Gordon, vice president for Semiconductors & Electronics at Gartner.

“What would we do with it? We’re not going to build high volume fabs to compete with Taiwan, South Korea, or the USA, or even China,” he added.

According to Gordon, if £1 billion in funding is forthcoming, it will most likely be targeted at specialist niches and at specific points in the semiconductor value chain.

“In the grand scheme of public spending, a billion is not even a rounding error. We already know what the 'UK chip strategy' will be; it will cherry pick a few areas where we think we might have some expertise (and can claim to be 'leading'), but which does not require multi-billion investment, such as compound semiconductors,” he explained.

Whether this will be enough to satisfy UK-based semiconductor companies is not yet clear. In February, The Register reported that the chief execs of several tech startups, including Pragmatic Semiconductor, IQE, and Paragraf had expressed frustration with the level of support from the government.

'Ship has sailed' for the UK on silicon-based semiconductors, but still hope for non-silicon alternatives

Pragmatic founder Scott White was in the news this week to say he was considering moving his company abroad if the UK government fails to come up with a supportive enough strategy.

The company – which specializes in flexible thin-film technology – may move to the US to take advantage of CHIPS Act funding, according to Bloomberg.

White told us that if reports of the £1 billion pledge are correct, then the full force of the investment will only be felt if it is used correctly.

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"The ship has sailed for the UK to catch up on production of silicon-based semiconductors, but there is still scope for us to become a world leader in non-silicon alternatives," White told The Register.

"Equally, if the funding is spread too thinly, rather than focusing on the highest potential for growth and with a particular emphasis on industrialization and commercial scale-up, it won’t be enough to move the dial."

"Ultimately, the proof is in the pudding. The sooner the specifics come to light, the sooner industry will know where it stands and will be able to plan accordingly," White said.

Pragmatic’s investors include British Patient Capital, a subsidiary of British Business Bank plc, the UK government’s economic development bank, plus In-Q-Tel, an American not-for-profit venture capital firm that is said to operate as an investment vehicle for the CIA.

Earlier this year, the UK government came under fire from a committee of MPs within the House of Commons for the delays over publishing its semiconductor strategy.

At the start of the year, a group of prominent technology industry advocates including Hermann Hauser, who in the 1980s helped in the genesis of the Arm architecture, published an open letter to Prime Minister Sunak asking him to "prepare and publish a UK Semiconductor Strategy as a matter of urgency" as "Britain's status as a leading tech ecosystem is at risk."

A government spokesperson told The Reg: "Our forthcoming semiconductor strategy will set out how the government will improve the sector's access to the skills, facilities and tools it needs to grow. The strategy will be published in due course." ®