Critics say £1bn for UK chip industry not enough

Critics have branded the UK government's delayed £1bn package of support for the semiconductor industry as "insignificant".

Semiconductors, or chips, are inside everything from phones to cars and the government has just unveiled a new 10-year strategy.

But it is facing allegations it is not enough - the US and EU have announced support closer to $50bn (£40bn).

The PM said the plan would help turn the UK into a technology superpower.

Details were released shortly after Prime Minister Rishi Sunak agreed a partnership on semiconductors with Japan.

By boosting Britain's semiconductor industry "we will grow our economy, create new jobs and stay at the forefront of new technological breakthroughs", Mr Sunak said.

However, that ambition took a knock when Cambridge-based firm Arm, whose chip designs power many smartphones, chose to list its shares in New York rather than London.

Arm, arguably once Britain's biggest tech asset, was sold to Japanese firm Softbank despite calls for government intervention.

The UK's biggest chip plant in Newport was also very nearly taken over by a Chinese company.

But Rene Haas, Arm's current chief executive, did welcome the new regime which would help the UK play a part in global chip supply chains for the next generation of technology.

And trade body TechUK said it was a "starting gun" on a bright future for the UK semiconductor industry.

Tim Pullen, from British chip maker IQE, told the BBC Radio 4 Today programme that the government strategy is "definitely stepping" the industry in the "right direction.""It recognises the importance of semiconductors to the economy, to national security, and to supply chain security that's so vital to our lives and what we now need to do is work very closely with the government as we move to the execution phase," he said.

Small fry

But critics argue the sums on offer in the strategy, which had been expected to appear last autumn, are limited compared to other nations' efforts.

US support to its industry under the CHIPS Act totals $52bn, while the EU equivalent will amount to €43bn of aid.

The money is also small compared with private sector investment. This week Ireland saw semiconductor firm ADI invest €630m in a research and manufacturing facility in Limerick.

The chair of the House of Commons Business Select Committee, Labour MP Darren Jones, welcomed the strategy and the recognition of the need to invest but added, "the initial £250m is a very small amount of subsidy compared to other countries".

Under the strategy £200m will be invested between 2023-25 to provide infrastructure for industry, fund more research, and promote international co-operation.

'Frankly flaccid'

Labour shadow culture minister Lucy Powell said that after years of delays, the strategy would be met with disappointment and showed "significantly less ambition than our competitors".

Gaurav Gupta of consultants Gartner said the funding was fine for research, but if the ambition was to be competitive with the big players in the field - Nvidia, Qualcomm, Broadcom and AMD then the £1bn was "insignificant".

Dr Simon Thomas, chief executive of UK based graphene semiconductor start-up Paragraf, told the BBC the announcement was "quite frankly flaccid".

"It is a long way from addressing the needs of UK chipmakers," he said.

Zoe Kleinman, the BBC's technology editor said: "Many businesses making hardware say when there's a shortage, it's difficult to get a look-in with the enormous chip manufacturers because their output is hoovered up by giants like Apple with far deeper pockets than anybody else.

"Will the UK government have sharp enough elbows to muscle in? It is a noble ambition to attempt to "mitigate" supply chain issues but ultimately, if we aren't making chips at scale ourselves, we are always going to be at the mercy of someone else."

Design focus

The BBC, and other media, were not shown the full report ahead of publication, but a summary was provided by officials.

The strategy will focus on areas the UK is particularly good at: semiconductor design, cutting-edge "compound" semiconductors, and research - areas that also require less funding than large scale chip manufacturing where essential machines cost hundreds of millions of pounds.

The strategy will also try to increase the security of chip supply through international partnerships.

Recent pandemic-fuelled chip shortages disrupted supplies of products from games to cars and critical manufacturing is concentrated in a few countries, such as Taiwan.

Peter Claydon, the president of Picocom a chip design company based in Bristol, told the BBC it was good to have the strategy but said: "It's not a lot of money."

And he would have liked to have seen tax breaks used to support the industry and more emphasis on education to help supply the skilled professionals the industry needs.

However, he valued the strategy's emphasis on international cooperation, although he said it would have been better to have remained in the EU with its multi-billion euro programme, which was enough to "make some difference", he said.