Countries are still trying to deal with global shortages of semiconductors

Twin fears have propelled the US and EU to invest heavily in new chip manufacturing capacity. Covid 19 saw global supply chains of all kinds of products grind to a halt, and chips have been in short supply during and after the pandemic. Semiconductors are now so essential—used in everything from phones and laptops to bank ATMs, trains, medical technologies, and the operation of internet itself—that no country can afford to be without them for long.

Advertisement
Advertisement

Secondly, tensions have been mounting between Taiwan, the base for TSMC and other semiconductor foundries, and China. Taiwan is the biggest manufacturer of chips in the world, and any aggressive moves by China towards the island nation could potentially make a huge dent in supply. Citing this very reason, in fact, Warren Buffett sold off a $4.1 billion stake in TSMC over the past six months.

The UK’s strengths in the semiconductor industry have, thus far, been evident more in design than in manufacturing. Arm, a Cambridge-based chip designer, for instance, licenses its work to chips used in around 95% of the smartphones in the world. (Softbank, which owns three-quarters of Arm, has been preparing to take the company public.) The lack of a robust domestic chip supply, however, is proving to be an industrial deficiency. In February, the Cardiff-based IQE, which manufactures components of semiconductors, warned that it may be forced to move to the US or Europe, “where the money is,” if the UK’s strategy wasn’t best for its business.

Advertisement

In a release, the UK said it is not trying to compete on chip manufacturing, but rather that its plan “will focus on growing the UK’s unique and already world-leading strengths in compound semiconductors, research and development, intellectual property and design.” Compound semiconductors are manufactured from two or more elements, as compared to the more common kind of semiconductor, which is made out of just silicon.

In the same government release, Sean Redmond, a managing partner at Silicon Catalyst, an accelerator focused on chips, said:These well thought through policy interventions will help UK companies drink from the global fire hydrant of opportunity as this critically important industry grows to $1 trillion by 2030.”

Advertisement

But others were less impressed. Simon Thomas, chief executive of Cambridgeshire electronics company Paragraf, told Politico the UK’s strategy was“flaccid.” Amelia Armour, a partner at Amadeus Capital Partners, which invests in semiconductor businesses, told the Financial Times that the £1 billion amount was “disappointing.”

📬 Sign up for the Daily Brief

Our free, fast, and fun briefing on the global economy, delivered every weekday morning.