The UK is missing out on a wave of investment and falling behind other countries in the fast-growing semiconductor industry because of a lack of support from the government, MPs have warned.
The government should urgently publish a long-delayed semiconductor strategy, and also look to create partnerships with allies to try to ensure the UK remains part of the semiconductor supply chain, according to a report published on Monday by MPs on parliament’s business committee.
Manufacturers used well over a trillion chips in 2021 to power devices ranging from vacuum cleaners to cars to advanced artificial intelligence computers. In the long term the need for advanced semiconductors in particular is expected to grow, and shortages of semiconductors since the start of the coronavirus pandemic have exposed the vulnerabilities of economies if supply is shut off.
However, the UK industry is heavily reliant on companies in other countries, with little prospect of a turnaround unless the government improves support, the MPs said. They said the government should consider supporting the creation of new “fabs” (the industry name for semiconductor factories).
“It is not clear to us that the support currently offered by government is at anything like the scale which is needed to make a real difference, or in line with a clear strategy from ministers,” the report said.
The government initially said it would publish a semiconductor strategy in “autumn 2022”, but has so far declined to say when this will occur.
“The government is putting UK plc at significant risk by failing to take action in support of the semiconductor industry,” said Darren Jones, the Labour MP who chairs the committee. “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.”
It comes after the government this month told the owner of the UK’s largest fab that it must sell it to protect national security. Nexperia, a Dutch company owned by the Chinese conglomerate Wingtech, is planning a last-ditch appeal to try to overturn the decision.
The decision to intervene was welcomed by some observers, who argued that letting the takeover remain in place may leave the UK vulnerable to Chinese government interference. However, the company’s staff association and management have expressed shock, outrage and fears for their jobs.
Nexperia said it welcomed the MPs’ commitment to consider the circumstances around the government’s intervention, although this will not take place until well after any appeal by the company is decided.
A Nexperia spokesperson said: “We fully intend to appeal the government’s decision and, in the interim, remain focused on supporting our 600 staff in Newport [in south Wales] at this time, most of whom have worked at the site for many years.”
Nexperia added that “much more needs to be done to attract sufficient levels of private finance to this very capital-intensive industry”.
The most advanced computer chips have only 3 nanometres (about 1/6,000th the width of a human hair) between the individual transistors that make up computer devices. Supply of those chips is dominated by South Korea’s Samsung and Taiwan Semiconductor Manufacturing Company (TSMC), but China, the US and the EU are all racing to build up their own advanced chip industries.
The UK is not a large global player in the semiconductor industry. It has no ability to produce advanced chips, so the report argued that the UK should focus instead on securing partnerships with allies such as the US and Taiwan to secure inward investments to be part of their supply chains.
Simon Thomas, the chief executive of Paragraf, a company hoping to use the wonder-material graphene in semiconductors, gave evidence to MPs of the US aggressively courting the company to encourage it to relocate, with no equivalent effort by UK authorities. He said the government should publish a strategy and implement it as soon as possible.
“At the moment, it is all talk and no action as regards semiconductors, but now is the time for action,” Thomas said.
A government spokesperson said: “We are committed to supporting the UK’s vitally important semiconductor industry. We are reviewing our domestic capabilities and working closely with industry and international partners to develop a new semiconductor strategy which will grow the sector further and make sure our supply chains remain resilient. Our strategy will be published as soon as possible.”