UK lays out $1.2 billion plan to invest in domestic chip sector

The UK is committing £1 billion ($1.24 billion) to bolstering its domestic semiconductor industry over the next decade, funding a long-anticipated strategy to engage in the battle for dominance in the global chips market.

The investment is a fraction of what other governments have pledged to the sector after pandemic-era shortages upended global supply chains and underscored the world’s reliance on Asia for chips used in everything from mobile phones to laptops and other home electronics. The US and EU have in recent months pledged roughly $50 billion and €43 billion ($46.3 billion), respectively, to spur manufacturing in their regions.

Britain’s plan is to home in on areas of the sector where the government believes the nation already has a comparative advantage rather than go head-to-head with governments throwing far more money at the industry as a whole. “Our new strategy focuses our efforts on where our strengths lie, in areas like research and design,” Prime Minister Rishi Sunak said.

Global chip supply disruptions brought on by COVID-19 restrictions touched off a race among major economies to secure inventories, protect their own proprietary technologies and make more semiconductors at home. The US in particular has aggressively targeted China’s efforts to advance its semiconductor technologies, blocking American companies from providing certain equipment and services to the country.

The UK Department for Science, Innovation and Technology said the government’s investments will focus on areas including research and semiconductor design. Britain is already home to Arm Ltd., SoftBank Group Corp.’s prized chip designer. The UK is also targeting compound semiconductors, made of combinations of elements with properties deemed promising in emerging technologies such as 5G, electric vehicles and facial recognition.

The government said the investment will expand the domestic sector, protect national security and mitigate the risk of supply chain disruptions. However, the silicon chips most critical to day-to-day applications will still come from overseas — particularly from Taiwan, home to the world’s leading supplier of chips. The UK will “increase its cooperation with close partners to develop supply chain resilience,” it said.

The UK’s total, 10-year funding commitment is less than what the world’s leading chip foundry company Taiwan Semiconductor Manufacturing Co. Ltd. spends every two weeks.

The UK government has been facing increasing pressure to lay out a strategy as other nations take aggressive measures to secure their own supplies. Signs have meanwhile emerged that Britain’s own industry is moving into foreign ownership. Arm, for example, decided to list in the US as opposed to London. In 2021, US chips giant Intel Corp. told the BBC it had ruled out the UK as a location for a new plant because of Brexit.

The opposition Labour Party’s Lucy Powell blasted the strategy, saying that it will be “met with disappointment by the scale of its ambition.” Following Arm’s decision to list in the US, she said, “This strategy offers little assurance we can maintain and grow an industry vital for growth and national security.”