DCMS to assess UK semiconductor industry

The Department for Digital, Culture, Media and Sport (DCMS) is looking to commission a £900,000 study to understand the technical and economic feasibility and requirements of a UK Semiconductor Infrastructure Initiative. In the tender notice for commissioning the report, the DCMS said it aims to catalyse growth of the UK semiconductor sector and contribute to supply chain resilience.

The global chip crisis has brought into sharp focus the UK’s reliance on a few major chip manufacturers (fabs) such as the Taiwan Semiconductor Manufacturing Company (TSMC), which is based in Taiwan. As Computer Weekly has previously reported, although the high-end microprocessors and memory chips used for computer hardware have fared pretty well during the semiconductor shortage, the same has not been true of sectors such as automotive, which are using more and more embedded computers as an integral part of their vehicle platforms.

These tend to be based on cheaper, older generations of semiconductor technology, where supply is very low. Governments around the world are responding to this crisis. As part of the European Chip Act, for instance, the European Commission (EC) aims to mobilise more than €43bn of public and private investments and set measures to prevent, prepare, anticipate and swiftly respond to any future supply chain disruption.

The US is ramping up economic pressure on China and has banned the export of certain US chipmaking equipment and semiconductor technology. In October, the US Bureau of Industry and Security (BIS) at the US Department of Commerce announced new restrictions limiting China’s ability to buy and manufacture certain high-end chips used in military applications.

In the UK, a big area of concern is how China is encroaching on home-grown tech. The government has ruled that Nexperia, an Amsterdam-based company whose parent company is Chinese owned, must now sell 86% of its stake in Newport Fab. Nexperia acquired the UK’s largest semiconductor manufacturing plant in 2021. 

Over the past few months, the National Security and Investment Act 2021 (NSIA) has been used to prevent the acquisition and licensing of other UK-based semiconductor technologies by Chinese manufacturers. NSIA blocks the transfer of algorithms, source code, databases, designs and other categories of intellectual property, if there is a risk to national security.

In July, the then UK secretary of state for business, energy and industrial strategy, Kwasi Kwarteng, made a final order under the NSIA blocking the University of Manchester from proceeding with an intellectual property licence and manufacturing agreement with Chinese firm Beijing Infinite Vision Technology Company, relating to Manchester’s SCAMP-5 and SCAMP-7 vision sensing processors. And in August, Kwarteng used the NSIA to block the acquisition of semiconductor design firm Pulsic by Chinese firm Super Orange HK Holding.

A recent report, following an inquiry by the Department for Business, Energy and Industrial Strategy (BEIS) looking at the UK’s semiconductor industry, reported that the industry had seen a significant lack of investment over the past 20-30 years into building fabs, which had “led to a distinct semiconductor ecosystem in the UK, with specialised ‘clusters’ forming around fabs providing jobs, spin-offs, and links with academia”.

The report said the UK’s “well-developed clusters put the country in a good position to capitalise on growth”, but added that it was 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”.

Trade association TechUK also produced a report for BEIS in June, The semiconductor industry in the UK, which warned about the prohibitive costs of attempting to build fabrication plants to enable the UK to onshore the chip manufacturing process. TechUK reported that because of the high level of specialisation in semiconductor manufacturing, barriers to entry into the market are extremely high.

“Attempts to onshore semiconductor manufacturing in the US and EU – via their respective Chips Acts – will require billions of dollars and euros in subsidies to establish,” TechUK said in the report. “Overall, these efforts to further diversify the global semiconductor supply chain should be welcomed. However, investment in these new manufacturing or fabrication plants will only be one part of a longer-term push to diversify the global supply of chips.

“While investments in new fabrication plants around the world will be vital to diversify supply, the global semiconductor industry is hugely varied, as well as being highly specialised. Therefore, completely onshoring the supply and value chains of semiconductors cannot be practically achieved, even within large trading blocs such as the EU and US.”

TechUK urged policymakers to look at similar efforts based on an assessment of whether such a heavy investment supports the UK’s existing strengths, and comparing this with the opportunity cost of directing public investment to advance existing areas of UK excellence.