UK government set to subsidise chip manufacturing in bid to cut overseas reliance

The UK government could be set to subsidise semiconductor manufacturers as part of a move to reduce the country’s reliance on foreign sources.

A report from Bloomberg, citing sources familiar with the matter, said the move could see billions of pounds invested to bolster domestic production.

This would include taxpayer-funded support for startups, assistance for existing firms to scale up, and the influx of venture capital in the sector to further support manufacturers.

As part of this move, reports suggested that the government also plans to create a dedicated taskforce with the aim of coordinating public and private support to increase semiconductor production over the next three years.

Under the new strategy, sources said that public funding will be provided through “existing programmes”, including the British Business Bank, Innovate UK, and the National Security Strategic Investment Fund.

The news follows recent reports that a draft semiconductor strategy, drawn up in 2022, recommended that the UK should cut its reliance on semiconductors from Taiwan amidst rising threats from China.

However, the government is yet to comment on the matter, and told the publication that details of the strategy will be revealed at a later date.

“We don’t comment on speculation,” a spokesperson said. “Our semiconductor strategy will be published in due course.”

Realistic expectations

While efforts to cut foreign semiconductor reliance are welcomed by British industry, questions remain over how the UK might achieve its goal of becoming independent in this regard.

Geoff Blaber, chief executive at CCS Insight, told IT Pro that expectations around the UK’s ability to meet semiconductor demands must be realistic.

“Whilst a formalised UK semiconductor strategy will be welcome, expectations need to be baked in reality and reflect enormous cost and complexity,” he said.

“The time and investment inherent in semiconductor manufacturing and the dominance of the US, Taiwan, and South Korea means the UK’s position in the global supply chain is not going to change overnight by the introduction of government subsidies.”

Blaber added that the goal of homegrown semiconductor manufacturing at scale is neither “realistic or plausible” in the short term.

“Where government can make a difference is by facilitating investment in the UK from global players and fostering a positive environment for companies in fabless chip design that builds on the legacy created by Arm”.

Semiconductor concerns

The issue of foreign reliance on semiconductors has been a long-running theme on both sides of the Atlantic, with the US government taking steps to further accelerate domestic production.

Last month, Taiwanese manufacturer TSMC announced it planned to triple investment in US operations and build a second production facility in Arizona.

The $40 billion (£32.2 billion) deal marked one of the largest foreign investments in US history and was lauded as a significant milestone in bolstering domestic chip-making capabilities. In the UK, similar calls have been to pursue a strategy akin to the US.

In an open letter published this week, British tech industry stakeholders urged the government to cut its reliance on foreign-supplied chips and provide greater support for domestic manufacturers.

Signatories included techUK, Tech London Advocates, and the Raspberry Pi Foundation.

“The industry needs a coordinated and comprehensive semiconductor strategy,” the letter reads.

“The technology and manufacturing sectors have been waiting more than two years for the promised strategy, and confidence in the government’s ability to address this industry’s vital importance is steadily declining with each month of inaction.”

Repeated calls for action from the industry have prompted some movement from the government, however.

Last month, the Department for Digital, Culture, Media and Sport (DCMS) announced it would conduct a feasibility study aimed at finding new ways to support the UK semiconductor industry.

The DCMS suggested this could see the creation of a “national microchip institution” that would provide support for UK manufacturing capabilities, bolster supply chain resilience and offer “better access to prototyping and manufacturing facilities”.