CPS semiconductor report urges action on chips

Cashing in our Chips: How to strengthen the UK’s semiconductor sector is a 53-page document outlining how the UK can foster growth in its semiconductor market without engaging in a ‘subsidy arms race’ with other nations. The Covid pandemic and geopolitical instability of recent times have placed enormous pressure on semiconductor supply chains. Securing a strong domestic base for microchips is considered a vital tool for securing long-term growth and technological innovation in the UK. The key recommendations laid out in the report are:

• Introduce tax and investment incentives for high-intensity R&D industries such as:
• a bespoke R&D tax credit for companies in sectors that fall within the ‘families of UK strength and opportunity’ as set out in the Innovation Strategy
• full expensing for non R&D plant and machinery, in addition to structures and buildings, for key sectors
• establishing an Emerging Technologies Strategic Investment Fund (ETSIF) within the British Business Bank to court international capital for the UK’s emerging technology industries
• Improve the immigration system for highly skilled STEM graduates and emerging technology firm workers 
• Add flexibility to the planning system to encourage the construction of scientific infrastructure such as laboratories and manufacturing plants
• Strengthen the focus on semiconductor policy within Whitehall

“The window of opportunity for the UK setting out its stall in the global chip race is closing, and we risk falling behind our international competitors,” said report co-author Zachary Spiro, manager at Flint Global, and a former parliamentary researcher for Conservative MP for Sir Bernard Jenkin.

“By taking decisive action now, we can cement advantage not just in semiconductors, but an entire range of industries that Britain could lead the world in. The policies set out in this report would, at little cost to the exchequer, provide the support and security firms around the world are looking for when deciding where to invest.”

According to the CPS, these proposals have low upfront costs and could be implemented almost immediately. While the UK government has yet to publish its semiconductor strategy, it has identified the sector as having high growth potential and being central to national security.

“The CPS report is yet another welcome reminder to the government of the huge potential for growth in the UK semiconductor industry,” said Scott White, CEO at Pragmatic Semiconductor, a UK company that specialises in flexible microchips. “We have a unique opportunity to build a thriving domestic microchip ecosystem, one that mitigates many of the issues surrounding supply chains and geopolitical instability.

“The government would be remiss not to take advantage of this potential to become a world leader in next-generation semiconductors, but it needs to take action now, or else it risks losing UK manufacturers to the enticing incentives overseas.”