Before the pandemic, the semiconductor industry was a largely unknown entity to the average person. In 2021, however, consumers started asking questions about why second-hand car prices were skyrocketing and why it was becoming so challenging to get hold of the latest PlayStation.

Although they vary in complexity and sophistication, what has become abundantly clear is that chips are at the heart of almost every piece of technology that is used in our daily modern lives.

They are in our cars, refrigerators, phones and game consoles. It would not be an exaggeration to say that they are extremely important to the functioning of our modern life. The combination of booming demand for consumer technology and disruption of the global supply chain has adversely affected supply, and the issue has become a matter of strategic importance for nation states around the world.

Geopolitics also played a significant role in the crisis. Russia’s invasion of Ukraine has deepened the upheaval in the global supply chain, and the semiconductor industry is no exception. More than 50% of the world’s neon, a component critical to chip production, comes from two Ukrainian companies: Ingas and Cryoin. Both firms went out of business at the start of the war.

The learning here is that there will always be unforeseen circumstances that can arise. Nations must better prepare for years of continued disruption. There is currently no definitive “end” to the shortage.

Taiwan produces over 80% of the world’s chips and has significant influence as the most advanced semiconductor manufacturer. Worryingly, the nation is caught in a geopolitical storm between China on one side and the US, Japan and the West on the other over its future.

Amidst all this geopolitical turmoil, there must be guarantees that there is a competitive environment for the industry to minimize the risk of entry later. The concentration of chip production in one country is unpredictable and unsustainable, and the shortage currently shows only limited signs of abating.

“Britain must deploy a similar sense of urgency”

At the time of writing, the UK government has yet to publish its semiconductor strategy. In contrast, the US has moved quickly in both the private and public semiconductor space – with major tech companies announcing plans to build their own foundries and the government moving quickly to push legislation. The EU is also discussing plans to build new, modern foundries.

In 2021 Samsung announced investment in a new factory also in Texas and Intel announced is planning to build two flagship logic factories in Ohio, due to start in 2022. These foundries will secure billions of dollars in funding, and building sites does take some time and even longer to become productive – but it will undoubtedly be worth it .

Echoing private-sector efforts, earlier this summer the US Senate voted to move forward with the Chips Act, which calls for more government funding for the industry and subsidies. The UK needs to deploy a similar sense of urgency.

Positive sounds are coming from the UK government. For example, the Department for Digital, Culture, Media and Sport (DCMS) is set to hire a senior policy adviser on semiconductors as part of its economic security department.

The UK’s Business, Energy and Industrial Strategy (BEIS) Committee is also heavily involved in investigations into foreign acquisitions of UK firms such as Newport Wafer Fab in its sale to Nexperia. However, almost two years into a global chip shortage – the government needs to act with a greater sense of urgency.

Semiconductor strategy is key to national interests

Investment, whether private or public, is not a quick fix. Britain also needs to protect its current assets. It is becoming a world leader in compound semiconductors and this needs further support. The controversial sale of Newport Wafer Fab to China-backed Nexperia is to be scrutinized in the ongoing UK government investigation and should do better than the handling of the 2016 sale of Arm to SoftBank.

The newly appointed chancellor at the time, Philip Hammond, took his eye off the ball when Arm was sold to SoftBank – a sale that went virtually unchecked and apparently ignored issues of national security and strategy. Softbank recently announced its intention to list Arm on the public markets, with Nasdaq as a possible winner over the London Stock Exchange.

Over the next ten years, the extent to which countries protect their digital sovereignty by retaining ownership of world-class technologies will become one of the most important debates facing nation-states. Government support does matter, with the recent implementation of the National Security and Investment Bill – for example – being a step in the right direction.

Now is the time for the UK to take ownership of this problem and demonstrate an absolute commitment to its domestic semiconductor industry to the rest of the world. The UK stands shoulder to shoulder with the US and China when it comes to technological excellence, growth and levels of investment, but has a less impressive track record when it comes to protecting its assets.

With chip shortages showing little sign of easing, the next government must urgently prioritize nurturing the capabilities of the semiconductor industry in the upcoming strategy. Not only does British technological superiority hang in the balance, but so do the UK’s wider strategic interests and ultimately national security.

Russian Shaw CBE is the founder of Tech London Advocates and Global technology advocatesand a regular columnist for UKTN.


Britain needs a government that commits to a world-leading semiconductor strategy

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