Nothing fishy about this newly funded British chip firm

• New investment in innovative English chip maker Pragmatic Semiconductor is the biggest ever venture financing round for a European semiconductor company
• Injection of £182m, with more to come, knocks recently sold Newport Wafer Fab off its perch as the UK’s biggest semiconductor manufacturer by volume
• More than 70% of the new money is from UK investors
• At least eight new manufacturing lines to be built by the end of 2028, each capable of producing billions of chips per annum

In a boost for the British chip sector, Cambridge, UK-based Pragmatic Semiconductor has secured £182m (US$228m) in a new round of funding that will help the company expand its operations to meet growing demand for its flexible integrated circuits. 

The funding round is, to date, the biggest venture financing for a European semiconductor company and will permit Pragmatic to wrest the position of the UK’s largest semiconductor manufacturer by volume from the current leader, Newport Wafer Fab in South Wales (of which more later…).

Of the lastest investment, £162m in Series D funding is already secured while a further £20m is guaranteed from an additional round limited to key investors. More than 70% of the funding came from UK investors, with the fund management specialist M&G Investments in the vanguard together with the state-owned UK Infrastructure Bank. Another key investor is Northern Gritstone, an investment fund set up in a partnership between Leeds, Manchester and Sheffield universities to support the commercialisation of science and intellectual property (IP)-rich companies spinning out from the three universities and to help fund the development of similar high-tech businesses across the North of England.

Others ploughing money into Pragmatic include the London-based startup investment vehicle Latitude, British Patient Capital (which is a subsidiary of the state-owned British Business bank), and Prosperity7 Ventures (which is part of Saudi Aramco and supports the development of “next-generation technologies and business models”).

The new funding comes only a year after Pragmatic raised $125m in its Series C round. 

Pragmatic, which was founded in 2010, is unique in that it both develops and makes flexible integrated circuits using plastic polymer substrates rather than the traditional silicon. Polymers are monomers strung together in a chain: In general they are resistant to chemicals, are insulators of heat and electricity, are light in mass and can have a wide range of strength, from extremely fragile to nearly as strong as steel.

What’s more, they can be processed into fibres, sheets, foams or intricate moulded parts. Pragmatic’s low-cost, ultra-thin and extremely flexible integrated circuits (FlexIC) are less than the diameter of a human hair. They can quickly and easily embed intelligence in a wide array of objects in ways not possible with conventional electronics and have a smaller environmental footprint in comparison to silicon chips.

Pragmatic, with the injection of new money, is now valued at about £500m. It specialises in low-cost customisation and fast production cycles, already makes smart and digital packaging to facilitate trading and tracing the flow of goods, and plans to expand into trackers and sensors for food containers, wearable health monitors, pharmaceuticals and security applications throughout the entire supply chain. What’s more, the ability of its chips to add “item-level intelligence” to trillions of consumer goods will, according to the company, help to revolutionise waste management, the reuse of materials and the recycling of what cannot be reused.

The company’s first fabrication facility for 300mm wafers, at Pragmatic Park in Durham, in the north-east of England, will come online by the year end and the new funding will help to pay for two new production lines (the company’s third and fourth) that will be built over the next couple of years. During the next five years, the company plans to construct at least eight new manufacturing lines in the UK, with each line able to produce billions of chips per annum. In total, more than 500 highly skilled jobs will be created in the UK as a result.

Following shortages of silicon chips as a result of global supply chain issues caused by Covid-19 around the world and growing geopolitical tension, the US, Europe and many other parts of the world are trying to lessen their dependence on Chinese technologies by developing and producing their own key components. Thus, in the US, huge sums of money are being spent on building new chip production factories on home soil. However, the current UK government is markedly less ambitious and, back in May, revealed a (heavily criticised) national semiconductor strategy that includes funding of “up to” £1bn – a drop in the ocean compared with what the US is spending.

Despite its undoubted strategic national importance, the UK government has tacitly admitted that the country can’t afford to build a global presence in the mass production of semiconductors and is unlikely to attract any meaningful investment from the likes of Samsung and its ilk, and so the national focus will be on innovative chip design rather than manufacture.

Hence the flood of money into Pragmatic Semiconductor. It’s a real vote of confidence in UK chip manufacturing on the part of British investors and comes six months or so after Pragmatic’s co-founder, Scott White, less than subtly opined that if the British government can’t or won’t help support the British chip industry in any enthusiastic and meaningful way, then the company might up sticks and move its operations to the US. 

And what of the other UK chip firm that has been in the news in recent years, namely Newport Wafer Fab? This has just been sold to the US semiconductor firm Vishay for $177mn after the UK government stepped in to compel Chinese-owned Nexperia to divest itself under the terms of Britain’s National Security and Investment Act.