The UK’s economy is naturally well-suited to semiconductor chip manufacturing. It has a technology-orientated service sector, an ability to produce advanced capital goods, powerful research and development capabilities, plenty of engineering and computer science graduates, and perhaps most importantly, it already has a developed semiconductor research and design industry. Despite this, the UK lacks an industry which actually manufactures semiconductors. At a time when Taiwan – the centre of world semiconductor chip manufacturing – seems increasingly under threat from China, the need for the West to develop its own semiconductor manufacturing industry is more pressing than before.
Semiconductors are the bedrock of modern technology, used from laptops through smartphones to highly-advanced medical equipment and supercomputers. Yet already, the UK has fallen behind in this race for developing the industry for manufacturing them. The United States fired the opening salvo with its CHIPS Act in 2022 which pledged $50 billion in subsidies for regrowing the domestic American semiconductor industry. This has already led to significant increases in investment in the industry, and large manufacturers such as Intel, TSMC and Micron developing new plants in the US. Likewise, France has invested €3 billion in a semiconductor plant, while Germany has secured deals with Intel and TSMC to build new plants in Magdeburg and Dresden on top of its €20 billion earmarked for subsidising the industry as a whole.
Indeed, what few domestic chip manufacturers there are have already threatened to move away from the UK. Pragmatic Semiconductors, a government-funded manufacturer, cited greater government support packages as a reason for considering a move abroad to the US. or the EU. IQE, another domestic company, has also considered a move abroad due to little government support. At the same time, Arm, a leading, well-known UK semiconductor manufacturer, chose to list on the New York Stock Exchange over the London Stock Exchange when going public last year.
Even this month, the Newport Wafer Fab – the UK’s largest chip manufacturer – was pawned to a US company two years after the government forced the Chinese firm Nexperia to sell it in 2022. Jobs have been lost and are predicted to continue to be lost as another overseas owner takes hold of the plant. No UK manufacturer stood up to buy the plant. This may be out of a lack of funding, but is probably because it simply does not make business sense in the current UK environment.
The solution is clear. The Government must start taking its semiconductor industry strategy seriously and allocate more support to manufacturers. With UK research and design capabilities already well-developed, and a high number of STEM graduates with knowledge of chip manufacturing producing a healthy marketplace of ideas, all that has to be done is for the Government to create a supportive environment for the sector. Besides job losses and a huge loss of potential as these graduates relocate to places with more government support, two fatal consequences will follow.
First, a lack of a home-grown semiconductor industry presents a national security concern, leaving the UK uninsulated from threats to its tech supply chains. Semiconductors go into just about every modern technology, and presently the UK is far too dependent on Taiwan to supply them. Should war break out between the People’s Republic of China and Taiwan, the tech-reliant UK economy could be devastated much like the economies of Europe were following the gas supply was cut off following the Russian Invasion of Ukraine.
Second, following fears that the UK financial sector could be adversely impacted by Brexit – examples of which are only beginning to materialise – it makes sense to diversify away from a sector built to work under the assumption of an unfettered movement of labour and capital with multiple countries. Semiconductor manufacturing presents a new industry which would already be adapted to post-Brexit restrictions on labour and capital, unlike finance. Further, semiconductor manufacturing would help rebuild the UK’s damaged manufacturing sector and make use of the deep pool of talent and technological knowledge present in the UK workforce.
Until the Government starts putting actions behind their words, and implements a subsidisation strategy to rival that of similarly developed economies, Rishi Sunak’s plan to make the UK a ‘technology superpower’ will simply remain rhetorical flourish. Worse yet, until then the UK’s significant potential for technology manufacturing will continue to go unspent.
Jonas Balkus is a master’s student studying International Relations at the University of Oxford and a member of Bright Blue.
Views expressed in this article are those of the author, and not those of Bright Blue. [Image: LIGHTFIELD STUDIOS]
