The UK government’s approach to the semiconductor industry has been criticised by MPs, who say the sector is not receiving the support or attention it needs from Whitehall. The MPs also questioned why a UK semiconductor strategy, more than two years in the making, has yet to be published by the Department for Digital, Culture, Media and Sport (DCMS).
MPs on Parliament’s Business, Energy and Industrial Strategy (BEIS) Committee have been holding an enquiry into the UK semiconductor industry for several months, and published their report today.
Countries around the world have been investing in their domestic semiconductor capacity after the global chip shortage of 2021 exposed the sector’s reliance on South East Asian producers. The US and Europe have both advanced strategies for the chip industry, with significant funding attached, but as yet nothing similar has emerged from the UK government.
Where is the UK semiconductor strategy?
The BEIS committee report says: “It is not clear to us that the support or attention currently offered by Government is at anything like the scale which is needed to secure our supply of semiconductors and to deliver the future prosperity of the semiconductor industry.
“The government must not overlook the semiconductor industry any longer. Whilst we recognise the difficult fiscal picture in the UK, we call on ministers to set up a new sector deal as the vehicle to work with industry to agree UK priorities and the best use of any public funds or support.”
The consequences of not taking action could be wide ranging, the MPs believe. “The UK is particularly exposed to future disruption in global supplies of semiconductors and is falling behind other governments in mitigating such risks. Failure to do so could result in significant economic shocks to UK business.”
The report also questions why the government semiconductor strategy has yet to be published. “DCMS told us that it had been reviewing its approach to the semiconductor sector and that it planned to publish a semiconductor strategy in autumn 2022,” it says. “The strategy has already been nearly two years in the making [and] the industry has waited for the strategy and will base crucial decisions upon it. The government should lose no more time and should publish its semiconductor strategy immediately.”
What should the government do for the UK chip industry?
The report makes a series of recommendations to the government for its semiconductor strategy, which it says should cover intellectual property and design, supporting the design chain for leading-edge node chips, matching UK manufacturing capability to UK design capability, developing manufacturing processes and building on existing strengths in compound and advanced material semiconductors.
It says the government should consider facilitating the construction of new chip factories, or fabs, including consideration of an open access fab in the South Wales cluster. It also recommends that the government “produces a risk and resilience strategy for the semiconductor industry alongside its semiconductor strategy, as a matter of urgency”.
Meanwhile, the committee believes BEIS, not DCMS, should have responsibility for the UK chip industry. “The sector is uncertain about where primary responsibility within Government lies and to which part of Government they should address concerns,” the report argues. “We believe that should rest with BEIS, because of its overarching responsibility for industrial strategy, business support, engagement with industry and policy on research funding, and because of its role in protecting UK industrial assets from undue control by overseas entities.”
When it comes to semiconductors, the UK’s expertise mainly lies in design, through companies such as Arm and Imagination Technologies, though both companies are now foreign-owned. The nation’s chip manufacturing sector is less well developed, and mainly focused on producing chips on older processes for use in power electronics and other low-end devices. There is no UK chip factory capable of producing high-end chips for PCs, smartphones and servers that rivals the expertise of manufacturing world leaders TSMC and Samsung.
The UK’s largest chip fab, Newport Wafer Fab, has conducted some work on compound semiconductors, combining silicon with new materials to achieve performance increases. The MPs believe the UK could carve a niche in this area, and says the government must provide support to Newport Wafer Fab after its decision earlier this month to unwind a takeover by Chinese-owned chip firm Nexperia on national security grounds. This means the future of the site, which employs more than 500 people, is uncertain.
“We will consider the Nexperia case retrospectively, in line with international best practice, once the period for appeal has expired,” the BEIS committee report says. “In the meantime, the Department should work proactively to ensure a successful transfer of the Newport site to a new owner. Ministers should update the committee on progress made.”
Semiconductor industry reaction: UK government ‘all talk and no action’
Dr Simon Thomas CEO of Paragraf, a UK company making graphene-based microchips, gave evidence to the inquiry. He backed calls for the semiconductor strategy to be published as soon as possible. “DCMS said this would be published months ago and I agree with the report, it is required immediately,” he says.
He points out that other countries are investing billions in their chip industries, but says “this [UK] government is all talk and no action on semiconductors. Now it is crunch time for action. Hiring consultants to kick this further into the long grass and potentially see no progress before the next election is not ‘action’. Government should support industry to produce the strategy and get on with it.”
Dr Thomas believes the UK has “the industrial talent and know-how to tackle this”. He says: “We have 19 working days until Christmas. Let’s take some meaningful action so we can go into 2023 with purpose and understand whether our business environment can scale-up advanced semiconductor enterprises in the UK.”
In response to the MPs report, a government spokesperson said: “We are committed to supporting the UK’s vitally important semiconductor industry. We are reviewing our domestic capabilities and working closely with industry and international partners to develop a new semiconductor strategy which will grow the sector further and make sure our supply chains remain resilient. Our strategy will be published as soon as possible.”