British semiconductor bosses threaten to move overseas as U.S. and EU splurge on chips
Florence Lo | Reuters
LONDON — The U.K.’s semiconductor industry is crying out for financial support from the government, with insiders warning the country risks losing its microchip firms to the U.S. and other countries if it doesn’t act soon.
Prime Minister Rishi Sunak’s government is yet to announce a strategy outlining U.K. efforts to support the chip industry. And semiconductor bosses in the country are growing frustrated.
Pragmatic Semiconductor, a Cambridge, England-based startup that produces nonsilicon chips, warned it may be forced to relocate overseas if the government doesn’t issue a plan for the industry soon.
“It has to make economic sense for companies like ours to continue to operate and manufacture here, and if there are greater potential economic benefits and governmental support packages abroad, then relocation is the only sensible business decision,” Scott White, CEO of Pragmatic Semiconductor, told CNBC.
Britain is an understated player in the global chip market, specializing in design, intellectual property, research and fabrication of compound semiconductors.
It is also home to one of the most coveted semiconductor-related assets in the form of chip designer Arm. Based in Cambridge, Arm-licensed chips are used in roughly 95% of the world’s smartphones.
Semiconductors, and the mainly East Asia-based supply chain behind them, have become a thorny issue for world governments after a global shortage led to supply problems for major automakers and electronics manufacturers.
The Covid-19 pandemic exposed an overreliance on manufacturers from Taiwan and China for semiconductor components. That dependency has become fraught with tensions between China and Taiwan on the rise.
TSMC, the Taiwanese semiconductor giant, is by far the largest producer of microchips. Its chipmaking prowess is the envy of many developed Western nations, which are taking measures to boost domestic production of chips.
IQE, a microchip firm in the semiconductor “cluster” in Newport, Wales, has also warned it may be forced to relocate to the U.S. or EU if the government does not act in the next six months.
“We would love to stay in the UK and have committed to grow in the UK … but we also have to do what shareholders want and go where the money is,” Americo Lemos, IQE’s CEO, told The Times newspaper.
A government spokesperson told CNBC: “We are committed to supporting the UK’s vitally important semiconductor industry. Our strategy will grow the sector further and make sure we have a resilient supply chain. The strategy will be published as soon as possible.”
In the U.S., President Joe Biden signed into law the CHIPS and Science Act, a $280 billion package that includes $52 billion of funding to boost domestic semiconductor manufacturing.
The EU, meanwhile, has earmarked 43 billion euros ($45.9 billion) for Europe’s semiconductor industry with the aim of producing 20% of the world’s semiconductors by 2030.
China, too, has been forced to revamp its chip strategy after facing strict trade sanctions from the U.S. In December, the country was said to be preparing a more than 1 trillion yuan ($147 billion) package for its chip industry, according to Reuters.
‘Act of national self harm’
U.K. tech industry executives have said the lack of a similar strategy from the government is hurting the country’s competitiveness.
The U.K. likely won’t have the kind of financial firepower to match those bold spending packages, they say. However, they’re hopeful the country will commit to investment in the several millions, tax incentives and an easier immigration process for high-skilled workers.
“Chasing to catch up is not within the spending power of the U.K., not even remotely,” Simon Thomas, CEO of Paragraf, a British firm developing and producing graphene-based electronics, told CNBC.
On Feb. 3, lawmakers on the Business, Energy and Industrial Strategy (BEIS) committee called for government action on the semiconductor industry, labeling the lack of a coherent microchip strategy an “act of national self harm.”
The government’s BEIS agency was on Tuesday disbanded and replaced under a shuffle from Sunak.
The business and industrial strategy portfolio now falls under the remit of Kemi Badenoch, minister for a newly formed Department for Business and Trade, while a Department for Science, Innovation and Technology is being headed up by Michelle Donelan.
Sunak became Britain’s third prime minister of the year in October, inheriting a gloomy economic backdrop from his predecessor Liz Truss.
He is under pressure from chip bosses to outline a strategy for the industry — and fast.
Russ Shaw, founder of Tech London Advocates, said the government needed to “step up.” London has been “inordinately distracted by chaos.”
A U.K. semiconductor strategy was expected to come out last year. But it has faced a series of delays due to political instability. The government previously suggested establishing a national institution, among other initiatives, to boost its semiconductor industry.
“The rumors I’ve heard is [it may arrive] any day now,” Chris Ballance, co-founder of U.K. quantum computing startup Oxford Ionics, told CNBC. However, he added the process had been “going on for the last four or five months.”
Correction: Russ Shaw is founder of Tech London Advocates. An earlier version misstated the name of advocacy group.
Intel snapped a losing streak of six straight quarterly losses and returned to profitability in the third quarter.
In its first earnings report since the Trump administration acquired a 10% stake in the company, the U.S. chipmaker posted strong revenue, noting robust demand for chips that it expects to continue into 2026.
Client computing revenue, which includes chips for PCs and laptops, grew 5% year over year, benefiting from PC market stabilization and artificial intelligence PC prospects.
CEO Lip-Bu Tan said in a call with analysts Thursday that artificial intelligence “is a strong foundation for sustainable long-term growth as we execute.”
The chip strength and demand were bright spots, but there were areas of concern as well, with the company’s foundry business still needing a big break.
Here are three takeaways from the chipmaker’s Q3 report:
Cash flow
“We significantly improved our cash position and liquidity in Q3, a key focus for me since becoming CEO in March,” Tan said on a call with analysts Thursday.
Intel landed an $8.9 billion investment from the U.S. government in August, along with $2 billion from Softbank, but has not yet received the $5 billion tied to a deal with Nvidia. The company expects that deal to close by the end of Q4.
With all of those transactions completed, plus the Altera sale, Intel will have $35 billion in cash on hand, CFO David Zinser told CNBC.
The U.S. government is the company’s biggest shareholder, and Intel stock is up more than 50% since Aug. 22, when Commerce Secretary Howard Lutnick announced the deal.
“Like any shareholder, we have to keep in touch with them,” Zinser said of the U.S. stake. “We don’t tell them how the numbers are going before the quarter. We generally talk to them like Fidelity,” another Intel shareholder.
Intel 3-month stock chart.
Foundry
The firm’s foundry remains a work in progress.
Revenue fell 2% over the year before, and it has yet to land a major customer.
Intel now has two fabs running 18A nodes, which are designed for AI and high-performance computing applications.
“We are making steady progress on Intel 18A,” Tan said of its latest chip technology. “We are on track to bring Panther Lake to market this year.”
Zinser said the more advanced 14A nodes won’t be put in supply until the company has “real firm demand.”
Old stuff still selling
Zinser said the company’s older chipmaking processes, or nodes, have continued to do well, “and that was probably the part that was more unexpected.”
Zinser said the chipmaker met some of the central processing unit (CPU) demand with inventory on hand, but they will be behind in Q1, “probably Q2 and maybe in Q3.”
The supply crunch has been with older Intel 10 and 7 manufacturing technologies.
Many customers are opting for less advanced hardware to refresh their operating systems, demonstrating enterprises aren’t waiting for cutting-edge chips when proven technology gets the job done.
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