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.
President Donald Trump shakes hands with Microsoft CEO Satya Nadella during an American Technology Council roundtable at the White House in Washington on June 19, 2017.
Nicholas Kamm | AFP | Getty Images
Microsoft said Thursday that it’s contributing $1 million to President-elect Donald Trump’s inauguration fund.
The software maker is now more closely aligned with its highly valued peers in the technology industry. Google said earlier on Thursday that it’s donating $1 million to the Trump fund, and Meta offered the same amount in December. Amazon was reportedly looking to make a similar contribution.
OpenAI CEO Sam Altman said in December that he would contribute $1 million individually, and Axios reported last week that Apple CEO Tim Cook will do the same.
Elon Musk, Tesla’s CEO and the world’s richest person, has been advising Trump as he prepares to return to the White House following the inauguration later this month.
Microsoft also contributed $500,000 to the first inauguration fund for Trump’s first term and gave the same amount to President Joe Biden’s fund, a Microsoft spokesperson told CNBC.
Satya Nadella, Microsoft’s CEO, has met with Trump on multiple occasions, including over negotiations surrounding a possible acquisition of TikTok in the U.S. in 2020. Nadella also joined a Trump roundtable of technology executives from around the country in 2017.
Microsoft is hoping that under Trump, the U.S. will push artificial intelligence policy in a favorable direction.
“The United States needs a smart international strategy to rapidly support American AI around the world,” Brad Smith, Microsoft’s vice chair and president, wrote in a blog post last week.
WATCH: Microsoft to end 2024 with capital expenditures of at least $53 billion
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