Computer Chips: While U.S. and EU Invest to Challenge Asia, the U.K. Industry Is in Mortal Danger
The U.K. Perspective
The U.K. once led the world in semiconductor manufacturing, with highly internationally innovative companies such as Plessey, Inmos, Acorn, Imagination Technologies and Cambridge Silicon Radio. There remain pockets of excellence and world-leading innovation, particularly in the design of semiconductors. Clusters in south Wales, the south west of England and east of England, for example, have a critical mass of activity. But they have lacked the necessary finance to upscale, and all the major investments elsewhere are putting the industry in an increasingly vulnerable position.
It’s not only the U.K.’s position in semiconductors that is under threat. A lack of capacity creates risks for the whole electronics supply chain, which could weaken the economy overall. For example UK car production has been severely curtailed by the recent chip shortages.
To avoid such problems, the U.K. needs to pass a Chips Act of its own. This would aim to kick-start the industry by incentivizing investment in manufacturing facilities, called “fabs”. Some commentators have argued against this move, mainly due to the huge costs involved. But it would be money well spent to achieve digital sovereignty.
A UK act should incentivize investment both directly and indirectly. Direct funding would ensure increased manufacturing capacity by building new fabs or expanding and upgrading existing facilities, especially for chips related to sensors, power, consumer electronics and communication devices. The government could then also support the industry indirectly through policies such as tax credits for investing firms, land provision and support infrastructure.
Another priority should be to strengthen existing national competitive advantages around designing smaller chips with more efficient circuits and greater computing power. This would involve both improving the current generation of chips and developing new approaches such as “beyond CMOS” technologies, which promise faster and more dense chips but crucially with a lower energy requirement. Providing R&D grants or guaranteeing loans to explore, test and consolidate new designs would help to return the UK to the forefront of developments in the sector.
University Funding
Finally, the UK needs to harness the knowledge and research expertise around design and manufacturing within its universities. This is spread around various institutions, including the universities of Cardiff and Swansea in Wales; Strathclyde and Edinburgh in Scotland; Queen’s University Belfast in Northern Ireland, which has its own foundry; and the University of Sheffield in England.
The U.K. government has funded over £1 billion of university research into semiconductors since 2006, but the U.S. and EU chips acts highlight just how much more is required. There is also a need to focus university funding on commercial outcomes that will translate into sales and increase the UK’s market share. Brexit has limited funding opportunities by raising uncertainties about the UK’s future involvement in the European “Horizon” scheme, which is the EU’s main R&D funding program. It may therefore require a national replacement.
Clearly, the national outlay to deal with COVID and the current cost of living crisis will constrain potential government investments in the coming years. But the recent semiconductor shortages have also made clear that a degree of self-sufficiency in this key enabling technology will be vital to ensuring economic resiliency in a highly volatile and unpredictable world.
Andrew Johnston is Professor of Innovation and Entrepreneurship, Coventry University. Robert Huggins is Professor of Economic Geography, Cardiff University. This article is published courtesy of The Conversation.
