Pricing, Politics and Politics in the UK Semiconductor Scene

CEO of AIoT chip company XMOSMark Lippett is a technology leader with 25 years of experience in startups, scale-ups and blue chips.

Of the nearly endless oddities caused by the pandemic, the introduction of semiconductors into everyday consumer discourse was one of the least predictable. The lack of electronics from new cars to PlayStations was an inevitable frustration.

The sudden and painful shortage has prompted international powers to launch a restructuring of the global semiconductor supply chain. This revolves around two major political powers: the United States and China.

The appetite and capacity for chips on both sides is unprecedented, with huge investments being made in pursuing chip independence – from the “Made in China 2025” initiative to the CHIPS Act in the United States. – alongside tariffs designed to manipulate demand. The export controls recently introduced by the United States on chips and advanced equipment destined for Chinese chipmakers, for example, are a targeted sanction in all but name, suggesting that China’s technical competence in chip manufacturing is progressing more than Washington would like to admit.

The impact of US legislation is felt far beyond its borders. Companies in countries allied with the United States are under pressure to comply. ASML, in the Netherlands, has been instructed to “refrain, directly or indirectly, from servicing, shipping or providing support to any customer in China until further notice” by its US management.

For those who depend on the goodwill, or at least the ambivalence, of either superpower for their ability to trade, this escalation is deeply concerning. State intervention is a blunt instrument, especially when used against an inherently globalized ecosystem of highly specialized elements.

On the home front

In such a precarious environment, the UK’s position is unique.

Europe is seeking to boost its semiconductor manufacturing capacity, with the EU Chip Act committing 43 billion euros to the cause. But secession from the EU is pushing the UK away from this investment.

A national strategy is needed. The pandemic and ensuing geopolitics have exposed a national fragility, based on reliance on external suppliers, which the UK government must address with speed and precision. Anything less can doom our thriving tech industry to the status of an equally popular industry.

This is more recently epitomized by the sale of the Newport Wafer Fab. Britain’s biggest semiconductor maker was bought for £63m by Nexperia, a Dutch subsidiary of Chinese firm Wingtech, in July 2021. More than a year later, that “sale” remains incomplete. A more decisive political definition would have either already finalized the sale or prevented it from the outset, allowing those involved to focus on the success of the business itself.

The resulting industry comments call for more clarity. Americo Lemos, CEO of UK-based semiconductor company IQE, hopes the US investment will “act as a catalyst” for the UK to follow suit. Meanwhile, Simon Thomas, CEO of Paragraf, a British startup specializing in graphene-based electronics, lamented a government that “doesn’t know what it’s doing” amid a potential return to the United States. .

All businesses large and small

The calls for investment, however, are not solely based on providing an alternative route to the sale of large companies. A serious approach to developing UK capacity for semiconductor design and manufacturing would focus on developing and empowering small businesses.

It may seem counter-intuitive given the scale of power wielded elsewhere and the financial heft of leviathans like TSMC and Intel, but the UK cannot afford to be entirely dependent on others in terms of design capability and silicon manufacturing. As Tom Tugenhadt suggested, “If you want to have home microchip capability, you have to start somewhere. You can start with a few 18 year olds and a bucket of sand, or you can start with what you have.

As such, there is a need for smaller semiconductor related businesses in the UK to work together to claim a small but important part of the global semiconductor supply chain. This will ensure the UK continues to be part of the global conversation as manufacturing capacity expands across Asia in the wake of US sanctions, with TSMC building new factories in Japan and Singapore. It will also stimulate the investments needed to increase the volume and quality of semiconductors produced, fostering an environment that will attract more and more talent.

To be informed

It’s easier said than done. Such an environment depends on the UK’s ability to become an attractive place to establish and grow small semiconductor companies. They need capital and cash flow to reinvest in their own projects, whether they are design or production oriented. From our current position, we will only ultimately establish the UK as a key semiconductor market if there is a financial incentive to do so.

This requires two things: an educated and engaged investor base, and a cohort of comparable companies to choose from. There must be an understanding of the complexity and nuances of the semiconductor market, and a significant differentiation between technologies and the goals of its manufacturers and designers.

And so we come back to the question of government and politics. How can the government, as so many industry figures have asked, catalyze the growth of this sector?

Money where your mouth is

One approach is to encourage the buying of stocks and shares from the wider investment community. For example, through targeted tax incentives for institutional, strategic and retail investors.

Another is government-led direct investment – ​​a reversal of free-market ideology that has led to the sale of companies like Inmos, CSR and Wolfson. It can either take a direct stake in certain enterprises, and/or make public funds available to others to do the same in accordance with its objectives.

Whatever the case, the important thing is that it is part of a coherent long-term strategy through which the government can inspire confidence. Increased investment in the UK’s semiconductor community will allow businesses to grow and innovate which, in turn, will begin to repair the UK’s ability to reach a baseline level of independence of semiconductors and to leverage on a global scale.

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