All these elements are underpinned by IP development, materials, wafer technology and advanced manufacturing equipment and over the years these different process steps have seen specialisation, and this has resulted in a growing concentration – or clustering – of high-end companies. For example, China and Asia now account for 75 per cent of manufacturing capacity, while the US is responsible for over 60 percent of chip design.
“In terms of the net value of the entire semiconductor sector, it generated about $600bn of revenues in 2021 and that is forecast to grow to $1trn or thereabouts by 2030,” said Imagination’s CEO, Simon Beresford-Wylie. “Behind that is the digitalisation of everything. Every sector is experiencing a transition or disruption.”
So where does the UK stand in terms of the global semiconductor industry. Globally the UK is quite a big player and is ranked about sixth. However, when it’s compared to the first-placed player, the UK is tiny. So, while our ranking maybe relatively high, our size is smaller. There are currently only 23 fabrication plants spread across the UK – most of which operate older 180nm fabs and are focused on more specialised products.
techUK, the technology trade association, suggests that the UK’s great strength is in semiconductor design and IP where it can be described as a world leader, hosting as it does over 110 design firms including the likes of Arm and Imagination, both of which are world leading companies making the UK a significant player in the global value chain.
According to Dr Andy G Sellars, Strategy Director, Compound Semiconductor Applications Catapult, countries like Korea and Taiwan have invested over the long term in silicon chip research and have developed, “World-leading capabilities in silicon chip fabrication, especially at leading edge nodes and, in response, companies have adapted by specialising in other parts of the semiconductor value chain.”
While Sellars points to the work of UK companies in terms of silicon chip design such as Bristol-based Graphcore, which has developed advanced silicon chips that contain over 50 billion transistors, “These chips can only be fabricated by TSMC in Taiwan.”
So, specialising in a particular function has encouraged innovation, improved productivity and driven down costs but it’s also meant the development of a globally integrated and complex supply chain.
The UK certainly has capabilities beyond design and IP and has, for example, considerable strengths in compound semiconductors and has a strong materials science R&D, design and manufacturing base that’s capable of supporting leading-edge applications such as 5G and electric vehicles, clean energy, defence and space technologies.
The UK Government has also talked about turning the UK into a science and tech superpower, attracting highly skilled workers and supporting the development of ground-breaking technologies in areas such as AI, high performance computing, and quantum technologies.
Earlier this year the Business Energy and Industrial Strategy Select (BEIS) Committee’s inquiry into the UK semiconductor industry called in key players to discuss the strengths, weaknesses and opportunities for the industry here in the UK. Among those companies taking part were representatives from Arm, Imagination, Intel, Paragraf, IQE among many others.
The inquiry is expected to report on what kind of strategy the UK should be adopting when it comes to developing its domestic semiconductor industry and establishing a more secure and resilient supply chain.
What are the challenges?
Speaking to the committee Professor Ken Young, technology director at the Manufacturing Technology Centre, said, “One of the challenges with current supply chain uncertainties is that almost every high-value product we produce nowadays has an electronic element to it. Without that electronic element, you cannot ship the product.
“Every product that we produce has more and more electronics in it, and we are going to have to get better and better control of those products to make them more efficient.”
When he was asked about increasing manufacturing in the UK, he made the telling point that in developing new capacity it was, “A large job to put in a new factory and to get it up to speed and producing. Part of the challenge is that no one knows whether the market will still be there by the time you have done it. It is a risk.”
Simon Thomas, Chief Executive Officer, Paragraf made a similar point but then said that while he was proud to operate and manufacture out of the UK, there were pressures to move manufacturing abroad.
“Our company attended an event in the US called SelectUSA which is about trying to pull businesses into the country – we were approached and asked if there was anything we needed to grow our business?
“In response, we said that we needed talent, infrastructure and potentially we needed capital. Shortly afterwards, they came back with a heatmap of the whole US, which showed us where all the talent was located. They also provided a heatmap detailing where supply chain partners were. They had gone out and done all of this work themselves.
“By contrast the UK’s DIT approached us and asked us why we didn’t outsource our OSAT business to a company in Malaysia?”
This highlights the mixed signals about what companies can and cannot do in the UK, according to Thomas, especially when even the UK Government is encouraging businesses to move elsewhere.
“There’s no joined-up thinking in the same way that SelectUSA operates,” Thomas suggested.
According to those interviewed the UK Government should look to help in the development of the infrastructure needed though grant funding or tax breaks to help grow businesses in the UK.
“There needs to be some kind of incentive that allows businesses to site here, because for the underlying technology, whether it is our graphene stuff, AI or quantum, which is big in the UK at the moment, the money is there privately,” added Thomas.
“In my opinion, there is great innovation in this country, but the problem comes when you have to turn that innovation into a real-world profit. That chasm exists and, for companies like ours, it is usually the infrastructure spend that is the issue. It is a big one and can be in the billions. We have taken on funding, and we have grown our own manufacturing capability, but that adds a lot of stress and really shouldn’t be our main focus.”
Americo Lemos, the CEO of IQE, made the point that it was essential to pick an ecosystem and then develop it.
“The semiconductor industry is very wide. When you look at places like Taiwan and what they did, they picked an ecosystem and can do pretty much everything in one ecosystem. In this country, there is an opportunity to create the same thing, not in silicon, but in compound semiconductors.”
Lemos called for a taskforce or champion within government to look after semiconductors – a suggestion supported by many of those questioned by the committee.
“From a company point of view, we would always like to have one point of access or one point of address. I have also proposed that we put in place what we could call an SIA - a semiconductor industry association. The US and the EU has one; Korea has one, as do Japan, China, Taiwan et cetera. That would allow us to discuss partnerships and develop policies, recommendations and processes and enable us to work more effectively together.”
Rina Pal-Goetzen, the director of global policy at the Semiconductor Industry Association in the US, spoke to the committee remotely and said that there was potential for the UK to strengthen its support for the supply chain especially in terms of semiconductor IP and design development.
“Funding incentives are just beginning to be rolled out, and most countries have not laid out how they are going to do that. Will funding only be for certain kinds of technologies and will it include international companies? Companies’ decisions are being made right now, so it is very urgent for every country to consider whether it would like to be part of the supply chain. These companies look five or 10 years out when making decisions about where the manufacturing will go and the ecosystem that goes around that.”
According to Pal-Goetzen, governments have a role to play in creating an ecosystem as making a chip will involve many partners with different specialisms.
“It is essential that there is co-operation within and between countries that can be relied on to make sure things work seamlessly.”
Post committee analysis
Following on from the committee’s deliberations New Electronics spoke directly with Simon Thomas, Chief Executive Officer, Paragraf and his frustration with the committee and with the attitude of government in general, was obvious.
“My take-away from this was that the Government simply doesn’t understand manufacturing, technology, or science. I don’t think anyone on that Select Committee truly understood what any of us did. And that shone through when they compared us to other industries such as automotive and steel – I think that comparison demonstrated a real misunderstanding about the industry.
“Semiconductors are in every type of technology, and they underpin everything and are essential to modern day living. I was concerned that no one in government seems to ‘get that’. And it’s not just a problem for companies like Paragraf but for industry bodies too. Too many ministers think that by talking to BAE Systems or Rolls Royce they understand manufacturing – they don’t!”
According to Thomas government should look at embedding industry experts across public bodies, so that there are real experts at the heart of the decision-making process.
“We should be seeing scientists and experts meeting every quarter that understand the needs of the semiconductor industry - that’s critical, in my opinion. This committee set up this inquiry as a response to the sale of the Newport Wafer Fab, but that is just a small part of what the UK does.
“A UK company, Flexenable, recently folded after being stopped from accessing Russian money - this was an established business which had attracted $1bn in venture capital and it was simply abandoned by the government. There is no strategic thinking or a coherent policy at present.”
According to Thomas government is failing to help business and is undermining efforts to grow the economy.
“The UK doesn’t have the money to create a UK version of the CHIPS Act, so we need to be clever and identify partners, many of whom are not based in the UK. With limited resources we need to pick specific technologies, create the right ecosystem, and build the manufacturing capacity but that will require some kind of commitment from government.”
The UK has been responsible for significant advances in graphene, silicon carbide and diamonds and should be building an ecosystem around these innovations to get some downstream value, according to Thomas.
“China is pouring money into these areas as is the US and the UK is falling behind. Yet again, we’ve missed the boat and the same has happened with quantum.”
Will the committee come up with anything that will deliver a more joined up and focused strategy that will help to deliver a more dynamic semiconductor industry here in the UK? Only time will tell.
