The UK government’s goal of making the UK a “tech powerhouse” is exciting, and even more so is the identification of semiconductors as one of the key technologies in the recently released UK technology framework. However, there has reportedly been a lot of criticism about delays and alleged distractions, which need to be addressed by the minister in charge. With this in mind, how can the framework for the semiconductor industry be completed?
First, it must now provide details on what it means for the semiconductor industry.
The UK Science and Technology Framework document sets out the UK’s vision and expected outcomes for the semiconductor industry, but crucially, the dots in between remain missing. We need clarity on the government’s vision, especially its ambitions, and where it will focus on supporting the growing number of start-ups in the sector.
With this in mind, I have a semiconductor strategy wish list I hope the government will act on:
1. Budget
While it’s hard not to envy the US government, the EU and China’s commitment to semiconductor manufacturing, the government has already made major 10-year commitments to the quantum computing industry (£2.5bn) and artificial intelligence (£1bn). Will there be a similar level of commitment to the semiconductor industry? Government clarity will reassure companies (and those investing in the venture capital industry) and allow them to plan with greater predictability.
2. Compound semiconductors are the key areas
Most in UK industry agree that we cannot go head-to-head with the US and China in the manufacture of silicon-based semiconductors. Instead, Britain must secure a position in a sector it can defend. The UK has world-leading intellectual property (IP) in areas such as compound semiconductors, which are critical for applications such as 5G and 6G, LEDS, lasers, autonomous vehicles and satellite communications. Turning this IP into a world-class business entity is a great example of creating the next generation of tech giants.
Key to our strength in compound semiconductors is the strength of our established ecosystem. Underpinning it all are world-class facilities such as the National Epitaxy Facility and the EPSRC Center for Doctoral Training in Compound Semiconductor Manufacturing, creating opportunities for collaboration between industry and academia to leverage this world-class research. The UK is also home to IQE plc, the world’s largest manufacturer of compound semiconductors.
I would like to see major investments in research institutions, lab space and infrastructure. I would also like to see investment spread across the UK. Clear government vision and ambitions are critical if we are to leverage this broad ecosystem to develop the next generation of successful companies.
3. The world’s leading financial and investment ecosystem
The 10-point plan lays out an exciting vision to ensure “adequate capital supply at all stages”, but details little about how this will be achieved. I think the problem is a combination of financial, regulatory and cultural issues that need to be addressed.
Turning to financial and regulatory challenges, the government hinted at plans to free up capital from defined contribution pension plans, which could provide significant funding for later-stage funding rounds (Series A and B). This could lead to more funds with strong firepower that typically exist outside the UK, which is certainly the right move.
Attracting significant funding can be challenging for early-stage startups. The core issue is that UK investors are risk averse compared to other countries that are more willing to accept large checks, such as the US.
If the UK could strengthen tax and investment incentives for deep tech (not just semiconductor) start-ups, that would set us apart. For example, SEIS already provides up to £150,000, usually for pre-seed funding, but if this could be scaled up to £1.5m, it would give capital-intensive early-stage companies what they need to scale up earlier while they remain in the UK cash.
4. Defending UK Intellectual Property
Why didn’t we have Google or Facebook? Saying we haven’t because we’ve been selling them (ARM and Deepmind, to name just two) is a bit flippant, and it begs the question of how do we encourage companies and founders to grow, stay British and become next An Intel or a Google? These global companies became the origins and engines around which other technology companies formed.
The UK is building a strong pipeline of world-class semiconductor deep tech start-ups, which we need to nurture. Today, the reality for many of these start-ups is that they will be acquired and their intellectual property transferred, or further developed overseas. We need to change the environment to encourage semiconductor companies (jobs) to stay and grow in this country. It is also important that we strike the right balance between facilitating such acquisitions and creating market conditions to ensure the UK remains attractive.
I don’t claim to know the answers to how this will be achieved, but the Newport fab shows that we need clarity on the regulation of acquisitions, as well as deciding when intellectual property becomes a national security issue and becomes a key strategy for UK technology.
5. Talent Acquisition
A key area is developing the talent funnel. There is a shortage of highly qualified engineers and more needs to be done to encourage students to take courses in physics and electronics. Traditionally, the semiconductor industry has high barriers to entry and candidates require a degree.
The strategy should outline alternative semiconductor career paths, such as supporting technician roles in electronics, computer science, and photonics. Likewise, tweaking the visa scheme to allow for greater talent mobility would enhance the UK’s attractiveness.
Post time: Apr-25-2023