The UK semiconductor industry is at a critical juncture, with techUK urging the government to act to maintain its global competitiveness.
Laura Foster, Associate Director of Technology and Innovation at techUK, said: “The UK has a unique opportunity to lead in the global semiconductor landscape, but success will require bold action and sustained commitment.
“By accelerating the implementation of the National Semiconductor Strategy, we can unlock investment, foster innovation, and strengthen our position in this critical industry.
Semiconductors are the backbone of modern technology, powering everything from consumer electronics to AI data centres. With the global semiconductor market projected to reach $1 trillion by 2030, the UK must act to secure its historic leadership in this lucrative and strategically vital industry.
“We must act at pace to secure the UK’s semiconductor future and as such our technological and economic resilience,” explains Foster.
UK semiconductor industry strengths and challenges
The UK has long been a leader in semiconductor design and intellectual property (IP), with Cambridge in particular serving as a global hub for innovation.
Companies like Arm, which designs chips used in 99% of the world’s smartphones, exemplify the UK’s strengths in this area. However, a techUK report warns that these strengths are under threat due to insufficient investment, skills shortages, and a lack of tailored support for the sector.
“The UK is not starting from zero,” the report states. “We have globally competitive capabilities in design and IP, but we must double down on these strengths to compete internationally.”
The UK’s semiconductor industry contributed £12 billion in turnover in 2021, with 90% of companies expecting growth in the coming years. However, the sector faces significant challenges, including high costs, limited access to private capital, and a reliance on international talent.
The report highlights that only 5% of funding for UK semiconductor startups originates domestically, with many companies struggling to find qualified investors.
A fundamental need for strategic investment and innovation
The report makes 27 recommendations across six key areas, including design and IP, R&D, manufacturing, skills, and global partnerships.
Some of the key proposals include:
- Turn current strengths into leadership: The UK must leverage its existing capabilities in design, IP, and compound semiconductors. This includes supporting regional clusters like Cambridge and South Wales, which have proven track records of innovation.
- Establishing a National Semiconductor Centre: This would act as a central hub for the industry, providing support for businesses, coordinating R&D efforts, and fostering collaboration between academia and industry.
- Expanding R&D tax credits: The report calls for the inclusion of capital expenditure in R&D tax credits to incentivise investment in new facilities and equipment.
- Creating a Design Competence Centre: This would provide shared facilities for chip designers, reducing the financial risk of innovation and supporting the development of advanced designs.
- Nurturing skills: The UK must address the skills shortage in the semiconductor sector by upskilling workers, attracting international talent, and promoting STEM education.
- Capitalise on global partnerships: The UK must strengthen its position in the global semiconductor supply chain by forming strategic partnerships with allied countries. This includes collaborating on R&D, securing access to critical materials, and navigating export controls.
Urgent action is required to secure the UK semiconductor industry
The report warns that the UK risks falling behind other nations if it does not act quickly. Countries like the US, China, and the EU have already announced significant investments in their domestic semiconductor industries.
The European Chips Act, for example, has committed €43 billion to support semiconductor infrastructure, skills, and startups.
“Governments across the world are acting quickly to attract semiconductor companies while also building domestic capability,” the report states. “The UK must use its existing resources tactically, playing to its globally recognised strengths within the semiconductor value chain.”
The UK’s semiconductor industry has the potential to be a global leader, but this will require sustained investment, strategic planning, and collaboration between government, industry, and academia.
“The UK Government should look to its semiconductor ambitions as an essential part of delivering the wider Industrial Strategy and securing not just the fastest growth in the G7, but also secure and resilient economic growth,” the report concludes.
(Photo by Rocco Dipoppa)
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