Semiconductor execs try to push UK government to do more for industry

The national strategy was released in May – but execs say it's not nearly enough

A group of British chip company execs has called on the government to do more to support industry, a month after officials published the nation's Semiconductor Strategy laying out policy initiatives for this vital technology sector.

In a report titled "The UK Semiconductor Industry – Our Opportunity," [PDF] the Semiconductor Leadership Group (part of industry association TechWorks) indicated it was broadly in support of the strategy, but said government needs to work more closely with them on a set of policies to build a long term sustainable and successful ecosystem for the country.

The long awaited semiconductor strategy was revealed in May, promising £1 billion ($1.24 billion) in funding to be targeted at areas seen as the country's strengths, such as chip design and IP, R&D, and compound semiconductors.

This was met with some criticism, notably from observers that believe the funding is not nearly enough to help the UK compete against rival nations that are pumping tens of billions into their own industries.

But in its report, the Semiconductor Leadership Group claims there is an opportunity for the UK to build a semiconductor industry that can play on a global scale, but with the caveat that this calls for a complete end-to-end ecosystem backed by research, design, product engineering, and manufacturing.

It also points to emerging markets such as power electronics, photonics, AI, quantum, telecoms and space, where the industry dynamics are different from the Moore’s law driven ever-denser computer chip market for CPUs and GPUs, and claims the UK has a “strategic opportunity” in areas such as multi-chip packaging and compound semiconductor materials. Manufacturing in future is expected to be less capex intensive with a shift away from sub-10nm silicon geometry, it claims.

The report notes the value of products in the supply chain tends to grow significantly between the initial innovation and what gets sold to the end user, and says that capturing value at key parts of the supply chain is important to build a successful and sustainable ecosystem.

The UK already has a strong history in IP licensing, (meaning chip designs or technology supplied under license to other chip companies) with Arm being a notable example.

However, it points out that the economic contribution made by end device shipments is typically much greater than that from IP licensing alone, as Arm seems to have figured out, and says the UK needs more chip companies that can capture a bigger slice of this end-device value.

Supply chain requires access to markets

Each part of the supply chain contributes to this end value, and stimulating domestic demand should help the UK economy to capture more of the value chain, according to the report, as well as build a more complete ecosystem. But it is also important to minimize friction when engaging in overseas trade (cough, Brexit) because as the UK sector grows, it needs easy access to other markets for growth at a global level.

The UK semiconductor industry has said for years that some form of support is needed in order to get things off the ground and stimulate growth, but the report says it is important that this does not necessarily mean just firing out subsidies in all directions, and that targeted support, measured to ensure return on investment, would be welcome.

As far as specific criticisms go, the Semiconductor Leadership Group says the government's strategy only addresses certain points in the value chain and will not help all the UK companies it might.

Early-stage innovation, design and IP creation businesses will welcome the prototyping and design tool support, but more support is required for others, such as fabless chip makers or integrated device manufacturers with a need to scale-up via a significant capex injection.

The report makes a number of broad recommendations.

They include:

  1. Funding for semiconductor manufacturers and fabless chip companies to build new facilities or upgrade existing ones, or to invest in new technology roadmaps;
  2. Incentives to build local supply chains that will not only foster greater resilience but retain more value within the UK economy;
  3. An injection of long term capital from investors with experience and understanding of the semiconductor market. Britain already has strong capital markets, but unlike elsewhere in the world, there is little understanding of the semiconductor sector among financiers, it states.

The authors of the report suggest the creation of a significant sized investment fund could support major semiconductor industry scale-ups, and could consist of a public-private mix of funds (OK, so some of their own money), with the proviso that aforementioned knowledge of the semiconductor sector is in place.

As ever, the report points to support R&D, especially between companies and universities, and that there needs to be some major initiative to build the skills and talent needed for a semiconductor industry, something our US cousins are well aware of. It suggests there could be programs put in place to offer retraining for workers from declining industries into important semiconductor related roles.

However, on a final note, the report highlights that the semiconductor industry is "a long game" – with investments often taking up to 10 years to come to fruition, which is beyond the horizon of the typical British government, which seldom looks beyond the next election.

The UK needs cross-party support and a clearly defined national infrastructure approach, often seen in other developed countries, in order to make it work. We can all dream, can't we? ®

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