The new analysis of supply chains and foreign investment by researchers from Sussex University and King’s College London reveals a complex reliance on China and America, leaving UK firms vulnerable to the ongoing trade war between the two superpowers.
In a statement, Dr Steven Rolf, senior research fellow in the Digital Futures at Work Research Centre, Sussex University Business School said: “We found more than a quarter of shares in the UK’s semiconductor firms are held by US investors. Add this to a huge reliance on US suppliers and a persistent, if uncoordinated, pattern of Chinese investments and there’s trouble brewing.
“We may enjoy a special relationship with the US, but over-reliance on any one country makes for a risky industrial strategy. As the Presidential election gets closer neither candidate is backing down from the tech war with China. We may end up stuck in the middle, with UK firms exposed to high geopolitical risk.”
The researchers found US investors hold an average 27.5 per cent share in the UK’s 61 major semiconductors firms, giving the US the largest share among foreign investors and outstripping the 21.9 per cent held by UK investors.
Suppliers are also weighted to the US, with 48 per cent of facilities supplying the UK’s semiconductor industry being located in the US, while 51 per cent of customers are domiciled there. While the US is a close ally, the researchers said this dependence poses risks to supply chain resilience, especially given the prevailing anti-globalisation agenda on the other side of the Atlantic.
China
Between 2014 and 2024, Chinese firms made up seven per cent of all greenfield investments in the UK chip sector. Scottish firm Future Technology Devices is 80 per cent owned by China’s Dongguan Feite Semiconductor, while Hertfordshire-based Imagination Technologies is owned by Chinese private equity Canyon Bridge Technology and Chinese state-owned CRRC is the ultimate owner of Lincolnshire-based Dynex Semiconductor.
The report finds Chinese investors hold equity in 36 of the UK’s 61 major semiconductor firms. The researchers said this leaves UK firms vulnerable to US moves to freeze China out of global supply chains.
Dr Joseph Baines, King’s College London, said: “Our analysis reveals wider Chinese investment in UK semiconductors than previously known, but not coordinated control. These links to China potentially leave UK firms vulnerable to pressure from the US to upend their existing operations. A measured, data-driven approach will best protect the UK’s interests. We urge the new government to carefully assess the situation without resorting to alarmism. The government ought to work closely with industry to proactively monitor geopolitical exposures in our increasingly fractious world.”
UK governments
The previous UK government published a National Semiconductor Strategy to grow the sector in 2023, but the new report criticises a lack of data behind this policy, saying it is based on “generic market analyses”.
The new administration has started to address this, with a fresh sector analysis published by the Department for Science, Innovation and Technology mapping the industry’s regional structure providing some insight into UK firms’ international operations. However, it does not consider supply chain risks outside of Taiwan, where the majority of semiconductor manufacturing occurs. It also fails to identify geopolitical risks posed by foreign ownership and investment.
The study also found Brexit-related trade barriers may see UK firms missing opportunities from EU investments. While the UK has negotiated access to €1.3bn in EU research and development funds, UK companies remain ineligible for direct funding or subsidies under the European Chips Act.
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