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UK ‘missing out’ on $500bn semiconductor industry

Semiconductors An engineer holds a chip while posing for a photo, he is in the middle of testing reactions from different materials and shapes that can have on the chip at the Taiwan Semiconductor Research Institute (TSRI) in Hsinchu, Taiwan, February 11, 2022. Picture taken February 11, 2022. REUTERS/Ann Wang
Semiconductors: More than a trillion chips were used globally last year to control every kind of electronic device. Photo: Ann Wang/Reuters

The government is putting the UK at risk by overlooking the $500bn (£413.6bn) semiconductor industry amid a shortage of the key components used to make the technology for everything from cars and washing machines to military technology.

The Business, Energy and Industrial Strategy committee (BEIS) is urging the UK government to secure partnerships with strategic allies to secure inward investment in the UK semiconductor industry.

“The government is putting the UK at significant risk by failing to take action in support of the semiconductor industry,” committee Chair Darren Jones said.

“Other countries are investing in the resilience of their semiconductor supply chains yet ministers in the UK can’t even publish their semiconductor strategy on time.

“Semiconductors are essential components of modern technology and in the infrastructure required to reach net zero. The industry is expecting high growth in the coming decades, which is an opportunity for us to leverage our strategic lead in design and in energy-saving compound semiconductors.”

Read more: Semiconductor shortage boosts Infineon's revenue

The new report from BEIS said that the UK is particularly exposed to future disruption in global supplies of semiconductors and is falling behind other governments in mitigating such risks. It warned that failure to do so could result in “significant economic shocks to UK”.

Globally, the semiconductor industry is worth more than $500bn and, despite a recent dip in demand, is expected to expand to over $1tn by 2030.

Semiconductors are essential ingredients of all modern electronic systems. They are used as switches and transistors and are the building blocks of computer chips.

Concerned by a worldwide shortage of semiconductors following COVID-19 lockdowns, governments across the world, particularly in the US and Europe, have been ploughing tens of billions into semiconductor investment.

“Following the decision to require Nexperia to divest from its Newport site, ministers must proactively engage with potential buyers to secure the future of our vital semiconductor cluster in South Wales,” Jones added.

Read more: UK tech overtakes China with £12.4bn in startup investment

Ministers have ordered Chinese-owned semiconductor manufacturer Nexperia to give up its Newport site, 16 months after it took it over in July last year, amid concerns that its owner Wingtech could come under the influence of Beijing.

MPs on the BEIS committee singled out cooperation with the US and engagement with Taiwan as possible areas that could yield opportunities for the semiconductor industry.

“T he UK is missing out on inward investment at a crucial time for the semiconductor industry, and we are competing with other countries. The government should secure partnerships via the US CHIPS Act, and engage with Taiwanese and other major companies to secure significant inward investment in the UK,” the report said.

Watch: Micron, Nvidia, AMD decline on weak outlook for the chip sector