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Chipmakers threaten to defect to US, EU if UK doesn't get its semiconductor plans sorted

Where's the Brexit bonus?

UK chipmakers are threatening to move their operations to the US or Europe if the British government doesn't get its act together and release its long-awaited semiconductor strategy.

CEOs of several UK chip startups – including Pragmatic Semiconductor, IQE, and Paragraf – expressed frustration that the UK government had failed to put forward a plan to fund the region's semiconductor industry, CNBC reported Monday.

UK chipmakers have been calling on the British government to act for many months – a request that's been further complicated by repeated changes in leadership in Britain's Year of the Three Prime Ministers.

The CEOs' comments come as the US prepares to divvy up $52 billion in tax breaks and subsidies to domestic chipmakers and the European Commission puts the final touches on its own €43 billion Chips bill.

Given the lack of progress in the UK, local chipmakers are considering taking their business to the US or EU in hopes of availing themselves of the funding.

"It has to make economic sense for companies like ours to continue to operate and manufacture here, and if there are greater potential economic benefits and government support packages abroad, then relocation is the only sensible business decision," Pragmatic Semiconductor CEO Scott White opined.

While Pragmatic, which produces flexible integrated circuits, is a relatively young chip company – having been founded in 2010 – other long-standing chippies are also considering a move to more favorable shores.

One of those is IQE. Founded in 1988, it specializes in producing wafers used in radio frequency and photonics applications. Speaking with The Times earlier this Month, IQE CEO Americo Lemos said that while the biz would like to stay in the UK, it had a duty to its shareholders to go where the money is.

UK chip strategy up in the air

Chipmakers aren't the only ones frustrated at the lack of progress toward a comprehensive UK Chips bill. Earlier this month, we reported that a committee of MPs slammed the British government over its failure to take action more quickly.

"It's a poor excuse for the government to hide behind its failure to publish a semiconductor strategy for not responding to our practical recommendations fully, " committee chair Darren Jones, Labour MP for North West Bristol, said at the time.

In response, the government said it was "aiming to publish the forthcoming UK semiconductor plan as soon as possible" – echoing a similar promise from a year earlier.

While many chipmakers are focused on the massive subsidies wrapped up in the US and EU Chips packages, not everyone believes this is the best path forward for the UK, which is already struggling financially.

The Center for Policy Studies – a "center-right" think tank founded by Sir Keith Joseph and former prime minister Margaret Thatcher – argued that the UK's chip strategy need not participate in a "subsidy arms race." Instead, it suggested introducing tax and investment incentives aimed at supporting British companies participating in semiconductor research and development. The think tank also suggested loosening immigration requirements to bring more skilled workers to the region.

Why not both?

There's also no reason that UK chipmakers couldn't take advantage of US Chips funds, if they're willing to build or move chip manufacturing to the US . According to Commerce Department docs released last summer, any company, foreign or domestic, that builds semiconductor manufacturing infrastructure in the US would be eligible to receive funds and tax breaks.

That said, if UK chipmakers want to wet their beaks they'd better act soon. The Commerce Department is expected to begin soliciting funding applications as early as this month.

The situation could be trickier for fabless UK chipmakers, which don't themselves possess the ability to produce chips themselves and instead rely on foundries operated by the likes of TSMC, Samsung Electronics, or GlobalFoundries.

We reached out to Arm Holdings – the UK's largest chip design company – for comment, but had not heard back at the time of publication.

Meanwhile Bristol-based Graphcore, which produces AI accelerators used to accelerate machine learning training and inference workloads, tells The Register that it remains committed to the UK and has no plans to leave.

"We design our chips in the UK and they are manufactured by TSMC in Taiwan. That setup works very well for us," Graphcore head of communications Iain Mackenzie said. "[The] UK strategy might, as is the case in Europe, look at ways to bolster native semiconductor manufacture, but that's unlikely to affect Graphcore."

Speaking of the EU Chips bill, the European Commission is expected to enter a new phase of negotiations this week. Much like the US, the European Chips bill aims to incentivize manufacturing in the region. ®

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