UK semiconductor strategy? What UK semiconductor strategy?

• UK government document has been in the works for two years but still nothing is published 
• A vital sector has been left in limbo or, more accurately, in purgatory
• Decisions have been left unmade thanks to floundering bureaucratic rivalries
• Damning report says “the government must not overlook the semiconductor industry any longer”
• Delays are “putting UK at risk by overlooking the importance of the US$500bn semiconductor industry”

Back in 2019, in seeking to win a UK general election, the manifesto of the Conservative party included a solemn pledge to reform adult social care. A while later, Boris Johnston, on his first day as prime minister, stood outside Number 10 Downing Street and promised that he had an ”oven-ready plan” to fix Britain’s underfunded, understaffed and generally neglected social care sector “for once and for all”. The late Queen Elizabeth II dutifully read out the details of the new government’s plans in the House of Lords. Some 30 Bills were to be introduced in the new session of parliament and a Health and Care Bill got a passing mention – and that was it. Two years later nothing has been tabled, there is no “oven-ready” plan, there probably never was one, and what has been cobbled together since then is so half-baked as to have been quietly kicked into the long grass by the current shameless administration. Now something akin to the above scandal is brewing at the Department for Digital, Culture, Media and Sport (DCMS), which has responsibility for the building of the digital economy, including the role of what could be a UK semiconductor sector. 

Inertia rules there. After two years of musings, pondering and deliberations on a much-vaunted and oft-promised ‘document’ outlining the UK’s semiconductor industry strategy, nothing has been published.

Sick and tired of endless inter-departmental discussions, fact-findings and meetings that have gone nowhere and signify nothing, a House of Commons committee has at last told the DCMS to pull its finger out, publish the results of its leisurely cogitations and give the UK semiconductor industry an indication of government thinking about the future of a vital industry (if, indeed, it has any thoughts on the matter at all).  

This is what the House of Commons Committee published on Monday: “DCMS told us that it had been reviewing its approach to the semiconductor sector and that it planned to publish a semiconductor strategy in autumn 2022. The strategy has already been nearly two years in the making. The industry has waited for the strategy and will base crucial decisions upon it. The Government should lose no more time and should publish its Semiconductor Strategy immediately.” Note the “lose no more time” rather than the more truthful “waste no more time”, which is what the DCMS seems to have been doing all these months.

Throughout the past two years, manufacturers, the defence industry, academics and other bodies representing the semiconductor sector have been asking the DCMS to publish its strategy and lambasting it for its continual and continuing inability to do so. They all complain that the UK government is utterly failing either to safeguard or enhance the industry, and while talking up its importance for the occasional TV soundbite, neglecting to do anything meaningful to keep the UK in the vanguard of a vital strategic sector.

Earlier this year, Andy Birnie, a Glasgow, Scotland-based senior executive for NXP Semiconductors, submitted this rebuke to the DCMS: “Personally, I haven’t seen any direction from government on growth or security in this industry. I am UK country manager of NXP Semiconductors, we have approx. turnover of US$12bn hence [are] a top-10 global supplier of semiconductors so I hope if there was any government direction, it would have been made visible to me. The current approach seems to have all the downsides of introducing friction for collaboration and investment without actually protecting core UK infrastructure.”

Now the UK parliament has published the House of Commons Committee report into the semiconductor industry in Britain and makes recommendations to the government. It didn’t call it “A report into the state of the semiconductor industry”, but perhaps it should have done because, thanks to the dilatory meanderings of the DCMS, it definitely is in a state.

The report says the UK “has a comparatively small semiconductor industry by comparison with the US or countries in Asia, but our products have global reach, and we have world-leading capabilities in certain fields, such as design, intellectual property and compound and advanced material semiconductors.” 

However, what Britain doesn’t have is an end-to-end supply chain. Supplies were very badly disrupted during the pandemic, and they remain potentially vulnerable to significant disruption from possible/likely geopolitical factors (such as China invading Taiwan, which would stop the exportation of microprocessors from that critical chip-producing nation).

The report stresses that the UK is “particularly exposed to future disruption in global supplies of semiconductors and is falling behind other governments in mitigating such risks. Failure to do so could result in significant economic shocks to UK business.” Thus, the government "should work more closely with allies in general, and the EU and the US in particular,  to safeguard the security of supply, both of finished products and of the materials needed for production in the UK.”

And in the meantime, it can maybe help to hang on to what few assets the UK currently has. The UK’s National Security and Investment Act 2021 gives the Secretary of State the power to review acquisitions by overseas companies and countries that could result in risks to national security. Those powers were used only a couple of weeks ago to require Nexperia, a Dutch company ultimately owned by a Chinese parent firm, to sell a minimum of 86% of its 100% shareholding in Newport Wafer Fab, a semiconductor manufacturer in South Wales. It's a start – see UK government overturns sale of Newport Wafer Fab on national security grounds.

The report also says that while many government departments “have intersecting interests in the UK semiconductor industry”, there is a problem in that it is unclear where primary responsibility lies. The House of Commons Committee recommends that such responsibility should be with the Department for Business, Energy and Industrial Strategy (BEIS), because it has ”overarching responsibility for industrial strategy, business support, engagement with industry and policy on research funding, and because of its role in protecting UK industrial assets from undue control by overseas entities.”

Words are cheap – recommendations are easy to ignore

The document further recommends that the Semiconductor Strategy should focus on six areas that have great potential for the ongoing  development of the UK semiconductor industry. These are: intellectual property and design; supporting the design chain for leading edge node chips; matching UK manufacturing capability to UK design capability; developing manufacturing processes for silicon semiconductors; the further development of existing strengths in compound and advanced material semiconductors, to meet demand in emerging markets; and facilitating the construction of new fabs, including consideration of an open access fab in the area of the “South Wales cluster”.

The report further recommends that the UK government should “urgently” produce a risk and resilience strategy for the semiconductor industry to sit alongside the still unpublished Semiconductor Strategy. But let's remember, in the corridors of power, “urgency” is a moveable feat.

It continues: “The UK is missing out on inward investment at a crucial time for the semiconductor industry, and we are competing with other countries. The Government should be more proactive in seeking to secure partnerships with US and EU counterparts and engage with Taiwanese and other major companies to secure significant inward investment in the UK.”

In a stinging conclusion to the report, the committee writes: “It is not clear to us 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 government must not overlook the semiconductor industry any longer. Whilst 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. This could be via additional funding or guarantees made available via the Compound Semiconductor Applications Catapult, Innovate UK or the British Business Bank.”

Shorn of the orotund diplomatic language of the mandarins of Whitehall, what the report tells the government is, “Get your finger out and bloody well do something. It's been far too long and there can be no excuse for not immediately publishing and acting upon the shamefully delayed Semiconductor Strategy.” (If one has actually been written, that is). 

Boris Johnson probably left it on a beach in Barbados along with his bottle of social care solution.