The UK semiconductor industry stands at a crucial turning point. With techUK urging the government to take decisive action, the time to act is now. Laura Foster, the Associate Director of Technology and Innovation at techUK, emphasizes the unique opportunity that the UK has to lead in the global semiconductor landscape. She states, “The UK has a unique opportunity to lead in the global semiconductor landscape, but success will require bold action and sustained commitment.”

This commitment is vital as the global semiconductor market is projected to soar to $1 trillion by 2030. For the UK to secure its historic leadership in this critical and lucrative industry, urgent measures must be adopted. Foster notes, “We must act at pace to secure the UK’s semiconductor future and as such our technological and economic resilience.”

Strengths and Challenges of the UK Semiconductor Industry

The UK has enjoyed a long-standing reputation as a leader in semiconductor design and intellectual property (IP). Cambridge has emerged as a global epicenter of innovation, home to companies like Arm, which designs the chips used in 99% of the world’s smartphones. While this showcases the strengths of the UK semiconductor industry, a recent techUK report indicates that these advantages may be at risk due to several pressing challenges.

The report warns that insufficient investment, a shortage of skilled workers, and a lack of tailored support for this sector threaten the UK’s leadership. The document highlights, “The UK is not starting from zero. We have globally competitive capabilities in design and IP, but we must double down on these strengths to compete internationally.”

In terms of economic impact, the UK semiconductor industry generated £12 billion in turnover in 2021. Remarkably, 90% of the companies in this sector anticipate growth in the coming years. However, significant challenges loom. High operational costs, limited access to private capital, and reliance on international talent compound these issues.

The Fundamental Need for Strategic Investment and Innovation

The techUK report puts forward 27 recommendations across six key areas: design and IP, research and development (R&D), manufacturing, skills, and global partnerships. Key proposals involve:

  • Turning current strengths into leadership: The UK needs to leverage existing capabilities in design and IP, supporting regional innovation clusters like Cambridge and South Wales.
  • Establishing a National Semiconductor Centre: This hub would provide essential support for businesses, coordinate R&D efforts, and enhance collaboration between academia and industry.
  • Expanding R&D tax credits: Including capital expenditure in R&D tax credits could incentivize firms to invest in new facilities and equipment.
  • Creating a Design Competence Centre: This shared facility for chip designers would reduce financial risks, enabling innovation in advanced designs.
  • Nurturing skills: The sector must address the skill shortage by upskilling current workers, attracting international talent, and promoting STEM education.
  • Capitalizing on global partnerships: Strengthening the UK’s position in the global semiconductor supply chain would involve forming strategic partnerships with allied countries.

Urgent Action Required

The report warns that without prompt action, the UK risks falling behind other countries. Nations such as the US, China, and the EU have already initiated substantial investments within their semiconductor industries. For example, the European Chips Act has committed €43 billion to support semiconductor infrastructure, skills, and startups.

As articulated in the report, “Governments across the world are acting quickly to attract semiconductor companies while also building domestic capability.” To avoid competitive disadvantages, the UK must strategically leverage its globally recognized strengths within the semiconductor value chain.

The potential for the UK semiconductor industry is vast, but sustained investment, strategic planning, and collaborative efforts between government, industry, and academia are essential. The report concludes, “The UK Government should look to its semiconductor ambitions as an essential part of delivering the wider Industrial Strategy and securing not just the fastest growth in the G7, but also secure and resilient economic growth.”

In conclusion, the future of the UK semiconductor industry hinges on the actions taken today. By committing to innovation and capital investment, the UK can solidify its position as a leader in this essential field. At Axie Consulting, we aim to help businesses navigate these changes by integrating advanced AI solutions into their operations, fostering innovation and growth in this dynamic landscape.