UK must act to secure its semiconductor industry leadership

The UK’s semiconductor industry is at a pivotal moment, with techUK calling on the government to take decisive action to maintain its global competitiveness.

Laura Foster, Associate Director of Technology and Innovation at techUK, emphasized the nation’s potential to become a key player in the global semiconductor sector. However, she stressed that achieving this will require bold action and long-term commitment.

“By accelerating the rollout of the National Semiconductor Strategy, the UK can attract investment, drive innovation, and strengthen its foothold in this crucial industry,” Foster explained.

Semiconductors are essential to modern technology, powering everything from consumer electronics to AI-driven data centers. With the global semiconductor market expected to reach $1 trillion by 2030, the UK must act swiftly to maintain its historical leadership in this high-value and strategically important sector.

Strengths and Challenges of the UK Semiconductor Industry

The UK has traditionally excelled in semiconductor design and intellectual property (IP), with Cambridge standing out as a global hub of innovation. Companies like Arm, whose chip designs power 99% of the world’s smartphones, exemplify the UK’s expertise in this area.

Despite these strengths, a techUK report warns that the industry is under pressure due to inadequate investment, talent shortages, and a lack of targeted support.

“The UK is not starting from scratch,” the report notes. “We already have strong capabilities in design and IP, but we must reinforce these strengths to remain competitive on the world stage.”

In 2021, the UK semiconductor industry generated £12 billion in revenue, with 90% of companies anticipating future growth. However, major challenges persist, including high operational costs, limited access to private funding, and a reliance on international talent.

The report highlights that only 5% of funding for UK semiconductor startups comes from domestic sources, making it difficult for businesses to secure the investment needed to scale.

The Need for Strategic Investment and Innovation

The report outlines 27 recommendations across six key areas, including design and IP, research and development, manufacturing, skills, and international partnerships. Key proposals include:

• Building on existing strengths: The UK should capitalize on its expertise in semiconductor design, IP, and compound semiconductors. Regional hubs such as Cambridge and South Wales should receive targeted support to drive further innovation.
• Establishing a National Semiconductor Centre: This would serve as a central hub to support businesses, coordinate R&D efforts, and facilitate collaboration between academia and industry.
• Expanding R&D tax incentives: The report suggests including capital expenditure in R&D tax credits to encourage investment in new infrastructure and equipment.
• Creating a Design Competence Centre: Providing shared facilities for chip designers would reduce financial risks associated with innovation and support the development of cutting-edge designs.
• Addressing the skills gap: The UK must invest in workforce training, attract global talent, and promote STEM education to ensure a steady pipeline of skilled professionals.
• Leveraging global partnerships: Strengthening collaborations with allied nations will help the UK secure its position in the international semiconductor supply chain, ensuring access to critical materials and navigating export regulations.

Urgent Action Needed to Secure the UK’s Semiconductor Future

The report warns that without immediate action, the UK risks falling behind global competitors. Other nations, including the US, China, and the EU, have already committed substantial resources to their domestic semiconductor industries.

For example, the European Chips Act has allocated €43 billion to enhance semiconductor infrastructure, workforce development, and startup support.

“Governments worldwide are moving quickly to attract semiconductor investment and bolster domestic production,” the report states. “The UK must act strategically, leveraging its existing strengths in the semiconductor value chain.”

With the right level of investment, strategic planning, and collaboration between government, industry, and academia, the UK has the potential to become a global leader in semiconductors.

“The government should view its semiconductor ambitions as a critical component of the broader Industrial Strategy—one that not only drives the fastest growth in the G7 but also ensures long-term economic security and resilience,” the report concludes.