UK Announces Subsidies to Support Domestic Semiconductor Industry

The British government is taking proactive steps to provide direct taxpayer funding to the semiconductor industry, as part of an overall strategy for this critical sector. This includes seed money for start-ups, assistance for existing firms in their scaling efforts, and incentives for private venture capital. A semiconductor task force is also slated to be launched, with the aim of coordinating public and private support to expand manufacturing of compound semiconductors within the next three years.

The British government is in talks with the Treasury to agree upon an overall figure that is expected to be in the billions of pounds, according to one person familiar with the plans. This comes as chips become increasingly vital components in products ranging from mobile phones to vehicles, and a shortage of these items could cause major disruptions in supply chains. Companies already impacted by COVID-19 are beginning to reevaluate their investments in the UK because of long delays in formulating a strategy. Compound semiconductors, which are made up of materials other than Silicon and used for more advanced technologies like 5G wireless devices and electric vehicles, are also part of this discussion.

The UK is pushing for the development of local semiconductor manufacturing, mirroring the US's effort to restrict exports of the technology to China to impede their progress in the chips industry. The Netherlands and Japan, major chipmaking countries, are close to backing the US against any link with Beijing.

Public funding may be supplied through programs such as the British Business Bank, Innovate UK, and National Security Strategic Investment Fund per government sources. A draft semiconductor strategy last year recommended that Prime Minister Rishi Sunak should take action to reduce dependence on Taiwan-made semiconductors due to Chinese aggression.

The UK's Secretary of State for Digital, Culture, Media and Sport, Michelle Donelan, is closely monitoring plans to publish a new version of its strategy in the coming weeks. According to one source familiar with the situation, the strategy suggests that diversifying supply sources for microchips from friendly and secure nations is a major geopolitical and economic issue. This would dovetail with UK Chancellor Rishi Sunak's desire to invest more in industries of the future and help entrepreneurs take off.

UK Shadow Foreign Secretary David Lammy has made a strong call for the UK to leverage its new-found Brexit freedoms to unlock innovation and creativity. He expressed his admiration for California's “entrepreneurial culture” and stated that the UK should work together with the EU partners to ensure secure access to semiconductors. This is an important move as the UK looks to expand its technological leadership in the world stages.