Question marks raised over UK semiconductor strategy

The UK’s National Semiconductor Strategy, just announced, has brought a mixed reaction from Cambridge executives.

The Government has decided to invest up to £1 billion in the next decade to improve access to infrastructure, power more research and development and facilitate greater international cooperation, with up to £200 million over the years 2023-25.

Taking into account there could be change of government in the next General Election, no-one is getting over excited. Indeed some executives say the initiative doesn’t go anywhere near enough.

Scott White, founder and Executive Director – Strategic Initiatives at Pragmatic Semiconductor, one of the largest semiconductor manufacturers in the UK – says: “I welcome the fact that the Government has recognised the potential of more sustainable semiconductors, by committing to build on our existing research base. 

“I was also pleased to see the strategy references our UK manufacturing capabilities to produce flexible semiconductor devices, an area where the UK can truly lead the world.

“However, there still are some question marks raised over the strategy when looking at the funding allocation. There needs to be further clarity around exactly what the £1 billion will be applied to, as well as how and when it will be applied.

“When you look at the areas the UK is focused on there is a valid question to be asked over whether that’s enough money to make a difference – is it too much of a dilution to spread the amount over 10 years? That can only be answered with more detail.

“Ultimately, you could invest £100m annually into something that really moves the needle for the industry. You could equally waste £1 billion in a year by focusing it on areas that won’t have an impact.”

That quote differs significantly from the one attributed to White in the Government’s release which indicates effusive support for the strategy.

Amelia Armour, partner at Amadeus Capital Partners, a UK VC firm which invests in semiconductor startups from bases in Cambridge and London, was critical.

She said: “The level of investment announced for the next two-year period is disappointing, especially considering the UK needs to try to keep pace with the investment levels announced as part of the EU and US Chip Acts. 

“£200m spread over many initiatives won’t achieve much and will need to be allocated in a very targeted way to have impact. The strategy also comes across as lacking compared to the £2.5 billion which has been announced for quantum technologies.”

Andrew Thompson, an intellectual property lawyer at London-based law firm EIP who specialises on semiconductors, gave a forensic assessment which puts the Government ‘strategy’ in firm perspective.

He said: “This initial announcement of the UK’s Semiconductor Strategy, while welcomed, does not tackle how the strategy will work in practice. Without that, it will be difficult to assess the impact on how UK companies in this space operate.

“The UK’s new Hiroshima Accord with Japan might in fact be of more consequence to many semiconductor companies. It highlights the importance of ensuring that collaborative R & D and therefore intellectual property, is structured in a way that serves the interest of the UK’s relatively small sized sector and its reliance on allies in terms of innovation. 

“Semiconductor companies need to carefully consider whether collaborative IP ownership provisions are right for them and be conscious of the risk of know-how leaking across borders, even when confidentiality provisions are written into agreements.

“It is disappointing that intellectual property, which is meant to be an important area of semiconductor strategy, has so far been largely ignored today – more so given the UK’s strength in core IP development.

“While more detail might be included in the official strategy document, there are several ways in which the current system can be streamlined and made more efficient.

“These include fast-tracking the process of obtaining patents in the first place and introducing tax incentives for companies generating profits from semiconductor-related inventions specifically.”

Cambridge-based superchip architect  Arm was more generous. CEO Rene Haas is quoted by the Government as saying: “Arm welcomes the UK government’s new semiconductor strategy, which will support the UK’s effort to play a part in global supply chains for next generation technology. 

“The UK is a significant hub of innovation and talent both for Arm and the wider industry and we look forward to working with the Government and other partners to help make this a reality.”

More than a trillion semiconductors are manufactured each year, with the global semiconductor market forecast to reach a total market size of $1 trillion by 2030. Semiconductors also underpin future technologies, such as artificial intelligence, quantum and 6G.

The strategy focuses on the UK’s particular areas of strategic advantage in the semiconductors sector – semiconductor design, cutting-edge compound semiconductors and what the Government calls “a world-leading R & D ecosystem - supported by UK universities from Cambridge to Cardiff and Manchester to Edinburgh demonstrating global leadership in this space.”

The Government says it has provided £539m in grants for research and £214m directly to SMEs in the sector across the last 10 years, as well as funding 450 PhD students since 2017.

Prime Minister Rishi Sunak said: “Semiconductors underpin the devices we use every day and will be crucial to advancing the technologies of tomorrow. Our new strategy focuses our efforts on where our strengths lie, in areas like research and design, so we can build our competitive edge on the global stage.

“By increasing the capabilities and resilience of our world-leading semiconductor industry, we will grow our economy, create new jobs and stay at the forefront of new technological breakthroughs.”