Government needs to do more for UK semiconductor industry, say MPs

The government must stop overlooking the UK’s semiconductor industry and do more to support it, or risk “significant economic shocks to UK business”, according to MPs.

Parliament’s Business, Energy and Industrial Strategy (BEIS) Committee has held an inquiry into the country’s semiconductor industry, culminating in a report calling for the government to publish its chip strategy immediately.

The report said the UK’s semiconductor industry has seen a significant lack of investment over the past 20-30 years into building semiconductor facilities, which has “led to a distinct semiconductor ecosystem in the UK, with specialised ‘clusters’ forming around fabs providing jobs, spin-offs, and links with academia”.

It said the country’s “well-developed clusters put the country in a good position to captitalise on growth”, but said it is not clear to the committee that “the support or attention currently offered by government is at anything like the scale which is needed to secure our supply of semiconductors and to deliver the future prosperity of the semiconductor industry”.

The report added: “The government must not overlook the semiconductor industry. While we recognise the difficult fiscal picture in the UK, we call on ministers to set up a new sector deal as the vehicle to work with industry to agree UK priorities and the best use of any public funds or support.”

The so-called chip crisis is not just a UK phenomenon, but a global issue. As previously reported by Computer Weekly, research from the European Central Bank, published in April 2021, found severe bottlenecks in some of the key manufacturing industries that rely heavily on semiconductors. For instance, Europe’s motor vehicle industry has been significantly affected by the chip shortage.

There are several reasons for this, but the main cause of supply shortages has been the Covid-19 pandemic and lockdowns, which particularly impacted the automotive industry.

The report said: “As automotive manufacturers reduced their orders for semiconductor components, production was switched to production for consumer devices, where demand was increasing due to a shift to working from home and remote learning.

“Forecasts failed to predict the high levels of demand which materialised once vehicle manufacturing fully resumed, and there was no additional capacity among suppliers of semiconductors to fulfil that renewed demand.”

Without clear guidance from the government, the industry will continue to struggle, said the BEIS committee report. It called on the government to immediately and urgently publish its planned strategy for the sector and increase inward investment.

Committee chair Darren Jones said the government is “putting UK plc at significant risk by failing to take action in support of the semiconductor industry”.

He added: “Other countries are investing in the resilience of their semiconductor supply chains, yet ministers in the UK can’t even publish their semiconductor strategy on time.

“Semiconductors are essential components of modern technology and in the infrastructure required to reach net zero. The industry is expecting high growth in the coming decades, which is an opportunity for us to leverage our strategic lead in design and in energy-saving compound semiconductors.”

The committee report said that while several government departments have a vested interest in the chip industry, and interests may overlap, but because of the importance of semiconductors to so many sectors of the economy and the country’s national infrastructure, it is essential that a single government department, namely BEIS, takes on this responsibility.

It called for the forthcoming strategy to include an analysis of the semiconductor production and supply chain, a heat map showing where different semiconductor industries and niches are located and how they are positioned with regard to the supply of skills, equipment and research.

“In addition, we recommend that the government produces a risk and resilience strategy for the semiconductor industry alongside its Semiconductor Strategy, as a matter of urgency,” said the report.

Although no country, including the UK, has an end-to-end supply chain for semiconductors, it does have tradeable strengths, the report added. It should therefore do more to work with international trade partners, such as its US and EU counterparts, and “engage with Taiwanese and other major companies to secure significant inward investment in the UK”.