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Wafer-Thin: Price, Policy And Politics On The U.K. Semiconductor Scene

Forbes Technology Council

CEO of AIoT chip company XMOS, Mark Lippett is a technology leader with 25 years’ experience in startup, scale-up and blue-chip companies.

Of the near-infinite oddities caused by the pandemic, the introduction of semiconductors into everyday consumer discourse was one of the less predictable. The absence of electronics from new cars to PlayStations was an inescapable frustration.

The sudden, painful shortage spooked international powers into initiating a restructuring of the global semiconductor supply chain. This revolves around two major political powers: the United States and China.

The appetite and capacity for chips on both sides are unprecedented, with huge investments made in pursuit of chip independence—from the "Made in China 2025" initiative to the CHIPS Act in the U.S.—alongside tariffs designed to manipulate demand. The newly introduced U.S. export controls on advanced chips and equipment destined for Chinese chip manufacturers, for example, are a targeted sanction in all but name—suggesting that China’s technical proficiency in chip manufacturing is making more progress than Washington would like to admit.

The impact of U.S. legislation can be felt far beyond its borders. Companies in countries allied to the U.S. are under pressure to conform. ASML, in the Netherlands, has been instructed to “refrain—either directly, or indirectly—from servicing, shipping or providing support to any customers in China until further notice” by its U.S. management.

For those reliant upon the goodwill, or at least ambivalence, of either superpower for their ability to trade, this escalation is deeply concerning. State intervention is a blunt instrument, particularly when wielded against an intrinsically globalized ecosystem of highly specialized elements.

On The Home Front

In such a precarious environment, the United Kingdom’s position is unique.

Europe is looking to bolster its manufacturing capacity for semiconductors, with the European Chips Act committing €43bn to the cause. But secession from the EU distances the U.K. from that investment.

A nationwide strategy is required. The pandemic and subsequent geopolitics have exposed a national fragility, based on dependency on external suppliers, that the U.K. government must address with speed and precision. Anything less may condemn our thriving technology sector to the status of an also-ran.

This is most recently embodied by the sale of the Newport Wafer Fab. Britain’s largest semiconductor manufacturer was purchased for £63m by Nexperia, a Dutch subsidiary of Chinese company Wingtech, in July 2021. Over a year later, that "sale" remains incomplete. More decisive policy definition would have either finalized the sale already or precluded it at the outset, enabling those concerned to direct their focus on the success of the business itself.

Resulting industry commentary pines for clarity. Americo Lemos, CEO of U.K.-based semiconductor firm IQE, hopes U.S. investment “will serve as a catalyst” for the U.K. to follow suit. Meanwhile, Simon Thomas—CEO of Paragraf, a British startup specializing in graphene-based electronics—has lamented a government that “doesn’t know what it’s doing” amid a potential return to the U.S.

All Businesses Great And Small

Calls for investment are not, however, purely based on providing an alternative path to the sale of larger firms. A serious approach to developing the U.K.’s capacity for the design and manufacture of semiconductors would focus on the development and enablement of small businesses.

This may seem counterintuitive given the sheer scale of the power wielded elsewhere, and the financial clout of leviathans like TSMC and Intel, but the U.K. can’t afford to be entirely dependent on others in terms of their capacity for silicon design and manufacture. As Tom Tugenhadt has suggested: “If you want to have a domestic microchip capability, you have to start somewhere. You can start with a couple of 18-year-olds and a bucket of sand, or you can start with what you’ve got.”

As such, there is a need for small semiconductor-related businesses in the U.K. to cooperate in claiming a small but important portion of the global semiconductor supply chain. Doing so will ensure that the U.K. remains part of the global conversation as manufacturing capabilities expand across Asia as a result of U.S. sanctions, with TSMC building new plants in Japan and Singapore. It will also stimulate the investment needed to raise the volume and quality of semiconductors being produced, fostering an environment that will attract more and greater talent.

Be Informed

This is easier said than done. Such an environment is dependent upon making the U.K. an attractive place to establish and develop small semiconductor businesses. They need the capital and liquidity to invest back into their own projects, whether design- or production-led. From our current position, we will ultimately only establish the U.K. as a go-to semiconductor market if there is financial incentive for doing so.

This requires two things: an educated and engaged investor base, and a cohort of comparable businesses to choose between. There must be an understanding of the complexity and nuance of the semiconductor market, and meaningful differentiation between the technologies and objectives of its manufacturers and designers.

And so, we come back to the issue of government and policy. How can the government, as so many industry figures have requested, catalyze growth in this sector?

Money Where Your Mouth Is

One approach is to incentivize the purchase of stocks and shares with the wider investment community. For example, through targeted tax incentives aimed at institutional, strategic and retail investors.

Another is direct government-led investment—a reversal of the free-market ideology that has led to the sale of companies like Inmos, CSR and Wolfson. It can either take a direct stake in some companies, and/or make government funding available to others to do the same in accordance with its objectives.

Regardless, the important thing is that it forms part of a coherent long-term strategy through which the government can inspire confidence. Boosting investment in the U.K.’s semiconductor community will empower companies to grow and to innovate, which in turn will begin to repair the U.K.’s capacity for a basic level of semiconductor independence and leverage on a global scale.


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