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Chip off the old block: why Liz Truss can’t let the UK fall behind on semiconductors

Posted by Chris King on 22nd September 2022

As the brains behind everything from datacentre servers and defence technologies to games consoles and cars, semiconductors are always in huge demand and underpin much of the global economy.

London’s old urban myth that you’re never more than six feet away from a rat is almost certainly truer of semiconductors.

So, in 2020 when the Covid pandemic hit, subsequent global lockdown measures caused havoc for the industry. Chip supply plummeted, supply chains ground to a halt, chip prices rose and big brand OEMs across many sectors were forced to make less stuff.

That tension between insatiable demand and under supply has never fully recovered.

But why?

A reliance on Asia makes semiconductor manufacturing vulnerable

The big issue stems from that fact that most of the world’s semiconductor manufacturing takes place in Asia.

Covid lockdowns, which are still impacting China today, were a wakeup call to how vulnerable this very centralised chip production supply chain is. Recent drama between China and the US over Taiwan has made everyone extra twitchy about long-term supply.

To cut to the chase, everyone is paranoid about China’s ability to restrict chip supplies in a similar way to Russian grain, oil and gas. That’s all the scarier because the European Commission’s Chips Survey suggests we’ll see a doubling of today’s chip demand by 2030.

In a recent interview with City AM, Dell’s EMEA president Adrian McDonald talked about how the world’s semiconductor outlook has shifted dramatically from ‘just in time’ to ‘just in case’ and put the emphasis on shoring up security of supply and access to chips.

Governments in the US and European Union, facing a serious need to up their game, have sprung into action.

In August, President Biden signed an executive order on the implementation of a $52.7 billion subsidy on US semiconductor manufacturing. This will benefit brands such as NVIDIA, TI and of course Intel, who announced this year plans to invest $20bn in two US fabs.

Over in Europe, the EU’s Chips Act will pump more than €43 billion of policy-driven investment into next-generation technologies, investor-friendly frameworks for establishing manufacturing in Europe and support for startups and SMEs (amongst other things). The overarching aim is to up the amount of global microchip manufacturing taking place in Europe by 2030 to at least 20%.

The Chinese aren’t standing still either with their own ‘Made in China 2025’ state-led industrial policy that seeks to make China dominant in global high-tech manufacturing. They don’t like playing second fiddle to their Taiwanese neighbours.

What is the state of play for the UK’s semiconductor industry?

So, what of the UK?

We’ve talked about reducing our reliance on Asian semiconductor manufacturing but that’s about the extent of it. There’s no sense of urgency.

Not only are we lacking any concrete action or a strategy — we’re actively dithering over whether to sell Newport Wafer Fab (our largest semiconductor manufacturer) to Nexperia, a Dutch subsidiary of the Chinese company Wingtech. #facepalm

Hermann Hauser, one of the godfathers of the British chip industry, aptly summarised the situation in a recent interview with UKTN: “The root cause of this problem over many years is that the large majority of the political class is technologically illiterate.”

In short, the UK’s politicians don’t get the strategic value of the sector.

The UK government needs to act on the semiconductor crisis

What do I think?

Liz and the gang have their hands full tackling the energy crisis, inflation, cost of living and the environment but they can’t ignore what is a very serious semiconductor challenge.

It feels like the semiconductor issue is getting caught in the cracks between the Department for Digital, Culture, Media & Sport and the Department for Business, Energy & Industrial Strategy. Somebody needs to take control.

As a tech PR consultant with bags of heritage in the UK electronics sector I would like nothing more than to see a buoyant UK semiconductor industry getting the recognition from government that it deserves.

That’s why it’s all the more important that we ramp up PR for the semiconductor industry to spread positive messages that help galvanise the government into action.

I’d love to help.

Chris King

Chris’s extensive experience of agency PR, ‘can-do’ attitude and track record for achieving outstanding results time after time make him a firm favourite amongst clients. His natural teaching skills make him an expert mentor and respected MD.