Chip companies threaten to move abroad

LONDON – The UK’s semiconductor industry is clamoring for financial backing from the government, with experts warning that the country risks losing its microchip companies to the US and other countries if it doesn’t act soon.

Prime Minister Rishi Sunak’s government has yet to announce a strategy outlining the UK’s efforts to support the chip industry. And the nation’s semiconductor bosses are growing frustrated.

Pragmatic Semiconductor, a Cambridge-based startup that makes silicon-free chips, has warned it could be forced to move abroad if the government does not issue a plan for the sector soon.

“It has to make economic sense for companies like ours to continue operating and manufacturing here, and if there are greater potential economic benefits and government support packages overseas, relocation is the only sensible business decision,” Scott White, CEO of Pragmatic Semiconductor , he told CNBC.

Britain is a low-key player in the global chip market, specializing in the design, intellectual property, research and manufacture of compound semiconductors.

It is also home to one of the most coveted semiconductor-related assets in the form of chip designer Arm. Headquartered in Cambridge, England, Arm-licensed chips are used in approximately 95% of the world’s smartphones.

Semiconductors, and the mainly East Asia-based supply chain behind them, have become a thorny issue for world governments after a global shortage led to supply problems for major automakers and electronics makers.

The Covid-19 pandemic has exposed an over-reliance on Taiwanese and Chinese manufacturers for semiconductor components. This dependency has become fraught with tensions between China and Taiwan on the rise.

TSMC, the Taiwanese semiconductor giant, is by far the largest producer of microchips. Its chip-making prowess is the envy of many developed Western countries, which are taking steps to increase domestic chip production.

IQEa microchip company in the semiconductor cluster in Newport, Wales, has also warned it may be forced to move to the US or EU if the government fails to act within the next six months.

“We would love to stay in the UK and we are committed to growing in the UK…

A UK government spokesman was not immediately available for comment when contacted by CNBC.

In the US, President Joe Biden signed into law the CHIPS and Science Act, a $280 billion package that includes $52 billion in funding to boost domestic semiconductor manufacturing.

The EU, for its part, has earmarked 43 billion euros ($45.9 billion) for Europe’s semiconductor industry, with the aim of producing 20% ​​of the world’s semiconductors by 2030.

China was also forced to overhaul its chip strategy after facing tough US trade sanctions. In December, the country was preparing a package of more than 1 trillion yuan (US$ 147 billion) for its chip industry, according to Reuters.

‘National Self-Mutilation Act’

UK tech industry executives said the government’s lack of a similar strategy was hurting the country’s competitiveness.

The UK likely won’t have the kind of financial firepower to match these bold spending packages, they say. However, they expect the country to commit to multi-million investments, tax breaks and an easier immigration process for highly skilled workers.

“Chasing lag is not even remotely within the UK’s purchasing power,” Simon Thomas, CEO of Paragraf, a British company that develops and produces graphene-based electronics, told CNBC.

On Feb. 3, lawmakers from the Business, Energy, and Industrial Strategy (BEIS) committee called for government action in the semiconductor industry, labeling the lack of a coherent microchip strategy an “act of national self-mutilation.”

The government’s BEIS agency was dissolved on Tuesday and replaced by a reshuffle by Prime Minister Rishi Sunak.

The business and industry strategy portfolio is now under the responsibility of Kemi Badenoch, Minister of a newly formed Department of Business and Commerce, while a Department of Science, Innovation and Technology is being headed by Michelle Donelan.

Sunak became Britain’s third prime minister last year, inheriting a gloomy economic backdrop from his predecessor, Liz Truss.

He’s under pressure from chip bosses to strategize for the industry — and fast.

Russ Shaw, founder of London Tech Advocates, said the government needed to “step up”. London has been “overly distracted by chaos”.

A UK semiconductor strategy was expected to be released last year. But it faced a series of delays due to political instability. The government has previously hinted at establishing a national institution, among other initiatives, to boost its semiconductor industry.

“The rumors I’ve heard are (could come) any day now,” Chris Ballance, co-founder of UK quantum computing startup Oxford Ionics, told CNBC. However, he added that the process had been “ongoing for the last four or five months”.

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