Techuk, a joint leader in the Chips Union, explores the UK’s position in the global semiconductor market and considers the changes needed to accelerate its position.
Semiconductors, often referred to as “chips,” are embedded in virtually every modern device. They are already essential in areas such as defense technology, medical equipment, vehicles, consumer devices, and more, supporting next-generation emerging technologies such as quantum, artificial intelligence (AI), photonics, renewable energy, and future communications. It is indisputable to say that semiconductors are one of the most valuable assets in the world today. It is predicted that global sales of semiconductors will be 1tn in 2030.
Whether it’s power electronics used in elementary devices such as Fridges or the most cutting-edge chips that power AI, the growth and relevance of this technology will certainly grow. However, growth in the semiconductor sector is inevitable, but the UK location of this story is inevitable.
Strategically important and uniquely vulnerable
The impact of semiconductors is monumental, but the supply chains they are designed and produced are extremely complex and susceptible to disruption. In 2020, the semiconductor supply shortage is estimated to have produced 8 million fewer vehicles in the automotive industry alone. ² Along with economic uncertainty, supply chain disruptions can threaten critical national infrastructure such as electricity and transportation networks.
The strategic significance, economic potential and inherent vulnerabilities of semiconductors have led governments such as the US, EU and China to invest heavily in domestic industries. For example, the European Chips Act allocates 430 billion euros to strengthen semiconductor infrastructure, support start-ups, develop labor, and drive innovation across the continent.
In November 2024, the European Commission’s vice president of technology sovereignty, security and democracy reaffirmed this commitment by naming semiconductors as the foundation of Europe’s future, along with AI, cloud computing, quantum technology and space. These national strategies usually include large public investment and generous subsidies, many of which are more prominently ambitious and competitive than the UK’s current efforts. The raw amount alone has warped £1 billion over the decade committed to the UK’s national semiconductor strategy by people like Korea. South Korea announced $470 billion in January 2024 to develop the world’s largest semiconductor cluster.
To remain relevant and competitive, the UK aims to strategically position existing subsectors, leveraging the globally recognized strengths of the semiconductor value chain to strengthen domestic capabilities and effectively respond to these international strategies.
UK Semiconductors: Powerful Gears in Global Machines
Strategically, the UK excels at the early stages of the semiconductor value chain, particularly in research and development, design and intellectual property. It also uses multiple elements to hold the main position of composite semiconductors that bring performance benefits to cutting-edge applications such as 5G, photonics, and quantum technology. These capabilities are closely aligned with the UK’s broader ambitions to lead emerging technologies such as AI, quantum and photonics.
The UK far outweighs the weight of these global markets. The Cambridge-based arm, where Chip architecture supports most of smartphones around the world, is a clear example of the UK’s global impact on semiconductors. In 2023, South Wales semiconductor clusters alone exported products worth more than £514 million, with 90% of production heading towards the international market. The UK is also a magnet that has 23% of new hires from UK semiconductor companies from overseas.
Already, the sector has made a significant contribution to the UK. In 2021, it generated £12 billion in revenue, accounting for 12% of UK total R&D spending. There are over 200 specialized semiconductor companies nationwide, half of which are located in London and the southeast, and the industry is geographically diverse and economically valuable. It is highly productive, with an estimated revenue per employee reaching £635,000. There is also high confidence in the sector, with 90% of companies expecting moderate to rapid growth over the next few years.
The UK does not have the capacity to manufacture large chips on par with global heavyweights such as Taiwan and South Korea, but there are around 23 commercially successful fabs that produce specialized products for the global market. In particular, the recent establishment of the UK’s first 300mm wafer manufacturing facility with practical semiconductors in the northeast represents a key milestone in expanding domestic production capacity.
National Vision
The UK’s National Semiconductor Strategy has been warmly welcomed by the industry as a bold roadmap to support growth in key areas such as skills, research and infrastructure. A positive step followed. In particular, the Digital and Technology Sector Plan has announced the creation of a new UK semiconductor centre for ages 19 as part of its industrial strategy. The central hub of the UK ecosystem has called for years of inquiry from Techuk, as well as from industry, in its open letter Chip Coalition to the Secretary of State last year, and in its 2023 manufacturing infrastructure feasibility study.
Techuk believes the centre could play a pivotal role in supporting the sector in several ways. First, UK semiconductor centres should act as a central hub and support scale-up through targeted initiatives that help integrate UK dynamic regional ecosystems, coordinate access to critical national infrastructure, and navigate and connect landscapes.
Additionally, the Centre needs to strengthen the link between semiconductors and other emerging technologies such as AI, quantum and photonics, play a prominent role in the international arena, and position the UK as a trusted and collaborative global partner in semiconductor innovation. This centre can prove to be a great tool in dealing with the biggest bottlenecks in the sector.
The UK’s semiconductor industry did not manifest itself by catching lightning bolts in bottles, but gained its place through wise and cooperative efforts through policy, academia and industry. However, past leadership is not considered normal. Just as Japan once dominated home appliances before losing ground to American, Korean and Chinese players, the UK’s current position as a strong partner in a niche sub-sector must double or lose face to other countries.
The UK remains Europe’s largest high-tech hub, but future leadership will depend on a strong foundation, and semiconductors are essential to it. National strategy tells us true progress, and early actions show promise. However, global competitiveness is not secured through Light Touch efforts. Now is the time to turn your strategy into sustainable actions. The rest of the world is investing hundreds of billions (and sometimes hundreds of millions) to secure future stakes in the technology.
Turning strategy into action
UK semiconductor ecosystems are cautiously optimistic as they benefit from a strong consensus on the challenges and interventions needed for growth. Its role in Techuk and the Chips Coalition helped us identify clear goals. It is transforming strengths into leadership, unlocking investments and ensuring a position in the global supply chain.
Turn your strengths into global leadership
The UK has not started from scratch. Chip design and IP, centered around Cambridge, has competitive strengths worldwide (along with other key hubs in Manchester, Sheffield and Bristol). South Wales also hosts a strong cluster of specialized non-leading edge manufacturing, such as compound semiconductors. These capabilities are built through smart, targeted policies and infrastructure that support innovation and scale.
The government must now build on this foundation with ambitious and coordinated plans tailored to each subsector. The skills required by a manufacturer vary greatly depending on the chip design skills. Policy interventions need to reflect that. Fast delivery is essential and makes the most of the UK’s deep expertise and potential. To compete globally, the UK needs to double its design and IP, R&D and composite semiconductor strengths, ensuring the financial support needed for high-growth companies to expand at a pace.
Allows greater investments in these strengths
To actually build these strengths, the government needs to ensure that semiconductor businesses ensure reliable access to both public and private capital. Despite having the world’s third largest tech sector, after the US and China, many UK semiconductor startups have limited access to large private investments as a key barrier. At Techuk’s 2024 roundtable on Semiconductor Scale-up, one founder noted that only 5% of the funds came from UK investments.
The UK needs an environment that supports investment, collaboration and talent across key subsectors. That is not possible if companies continue to face high costs and low levels of domestic investment. The government must ensure that a wide range of funding options are available on the full growth journey of the semiconductor business, from early stages to scale-ups.
Building a strategic global partnership
Global semiconductor supply chains are highly interconnected and interdependent, with certain countries and businesses holding key market forces. For example, TSMC in Taiwan produces around 90% of the world’s most advanced chips. The UK also plays an important role. Over 99% of smartphones use chips designed by Cambridge-based ARM worldwide.
These global supply chain disruptions, whether accidental or cautious, continue to affect the UK’s semiconductor capabilities. Building elasticity is essential. The UK is dependent on global partners, but the world is dependent on UK strengths as well. Governments need to recognize and harness this mutual trust by promoting the UK’s capabilities on the international stage and creating new opportunities for collaboration in research, investment and innovation.
Focused on delivery
Ultimately, semiconductors are the foundation of it, not another part of the technology landscape. The UK needs to maintain a strong semiconductor supply chain within the country for national resilience and future growth, and there is all the tools to do so. The National Semiconductor strategy has made some positive advances as the establishment of UK semiconductor centres retains a lot of potential to coordinate efficient support for the sector. Now we need to focus on delivery. That’s the task ahead, and groups like Techuk and The Chips Coalition are pushing hard to make this happen.
reference
https://www.axa-im.com/investment-institute/investment-themes/technology/advances-ai-and-tighter-markets-sees-robotics-and-automation-sector-sor https://www.csis.org/analysis/mapping-semiconductor-supply-chain-critical-role-indo-pacific-region https://www.dw.com/en/ https://csconnected.com/media/trijjr3n/csconnected-sipf-weru-nual-report-2023.pdf https://www.techuk.org/resource/uk-semiconductor-centre-anconce-as part of-strong-support-for-semiconductors-thright-for-semiconductors-fort-for-shemiconductors–
This article will also be featured in the 23rd edition of Quarterly Publication.
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