Government to invest up to £1bn in National Semiconductor Strategy

The £1bn investment over 10 years is based around three key objectives, namely growing the domestic sector, mitigating the risk of supply chain disruptions, and protecting the UK’s national security.

The overall strategy is focused on the UK’s areas of strategic advantage in the semiconductors sector, including semiconductor design, compound semiconductors, and Britain’s R&D ecosystem.

To support the growth of the compound semiconductors sector, the government will invest up to £200m between 2023-25 to improve industry access to infrastructure, deliver more research and development and facilitate greater international cooperation.

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

Over a trillion semiconductors are manufactured each year, with the global semiconductor market forecast to reach a total market size of $1tn by 2030. Semiconductors also underpin future technologies, such as artificial intelligence, quantum and 6G.

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In Hiroshima this week, the UK and Japan committed to establishing a semiconductor partnership, led by the UK’s Department for Science, Innovation and Technology (DSIT) and Japan’s Ministry of Economy, Trade and Industry (METI). It seeks to deliver new R&D cooperation, skills exchanges, and improving the resilience of the semiconductor supply chain for both countries.

UK Research and Innovation will work with the Japan Science and Technology Agency on a joint investment of up to £2m in early-stage semiconductor research next year. This will support UK and Japanese researchers to work together on fundamental semiconductor technologies.

Commenting on today’s announcement, Beibei Sun, consultant and automotive sector specialist at Vendigital, said: “Due to the time it takes to build capacity, the short-term impact of the funding may be low. However, the government’s decision to concentrate funding on the UK’s current areas of strength – research and design – is sensible, and should help to accelerate the development of non-silicon alternatives, such as flexible semiconductors. These are more sustainable products that can be produced at a fraction of the cost of more advanced silicon microchips, and their flexible structure means they are suitable for a wide range of applications.

Beibei continued: “In the long-term, exploration of these sustainable alternatives will have a high impact, both by injecting new capacity to the market and by securing an innovative edge for the UK.”

In the US the CHIPS and Science Act of 2022 included $52.7bn allocated for semiconductor research, development, manufacturing, and workforce development. With the EU accounting for 10 per cent of the global chips market, the bloc has sought to mobilise over €43bn of public and private investments through its own European Chips Act.

“Comparing absolute figures up for investment with other states might not be meaningful as the investment objective doesn't appear to be about trying to procure the building of foundries in the UK,” added Seiko Hidaka, a legal director at Gowling WLG. “The government should consider how the semiconductor industry might unfold in the future, as we see new and major shifts at this juncture, from increased use of open-source architecture, businesses designing [their] own chips, use of AI, development of special purpose chips, and geopolitics. The key is horizon scanning and being strategic. If successfully invested, UK could become a key hub for at least part of the semiconductor industry as a whole, which is fragmented but interconnected and global, meaning no one country can ‘do semiconductor’ on its own.”