DCMS will consider establishing a national institution for the UK semiconductor industry | Daily News Byte

The Department for Digital, Culture, Media and Sport (DCMS) has launched a research project aimed at finding new ways to support the UK’s semiconductor industry and could set up a national microchip institution to support its growth.

It will explore how to improve the development of the UK’s manufacturing infrastructure, strengthen supply chain resilience and provide “better access to prototypes and production capacity” for businesses.

DCMS also said it will consider how to support startups specializing in chip design and encourage closer ties between industry, customers and government to address “common challenges”, according to the tender notice for the feasibility study.

The results of the research are expected to inform how the government will meet the ambitions set out in its upcoming semiconductor strategy – due to be published in 2023.

Aiming to unlock the “full potential” of UK microchip businesses, it is hoped that the strategy will support job creation in UK industry and ensure a reliable supply of semiconductors.

The onset of the coronavirus pandemic caused a period of significant disruption in the global semiconductor industry as production declined. The disruption has raised concerns that the country is relying on a select number of major chipmakers outside the UK.

A recent report by the Department for Business, Energy and Industrial Strategy (BEIS) warned that a lack of investment in domestic semiconductor manufacturing plants, known as ‘fabs’, could inhibit industry growth.

“It is not clear to us that the support currently offered by the government is on any scale needed to make a real difference,” the report warned.

Over the last decade, the UK semiconductor industry has expanded significantly, with global revenue increasing by 95% between 2012 and 2021.

During this period, the DCMS noted that the UK had “established a number of major strengths” in chip design, research and complex semiconductors.

Digital Technology Secretary Michelle Donelan said the research will aim to build on this success and ensure the UK maintains its position as a global market leader.

She said: “We rely on semiconductors – they are in everything from our smartphones, kitchen appliances and cars to the supercomputers that support our weather forecasts, the energy sector and countless other areas of our economy.”

“In the UK, we are world leaders in areas including design and research. We want to build on these successes and keep our semiconductor sector on the cutting edge.

“This study will help us fulfill our ambitions and could lead to a new national institution and larger research facilities.”

National security concerns

The UK’s reliance on domestic suppliers also raised national security concerns that affected major acquisitions.

In November, the government told Nekperia, which owns the UK’s largest factory, that it had to sell to “reduce the risk to national security”.

Nekperia, which is a subsidiary of Shanghai-listed WingTech, bought a manufacturing facility at Newport Wafer Fab in July 2021. The purchase was met with urgent calls for the government to intervene on national security grounds.

The Commons Foreign Affairs Committee has warned that a sale to a state-backed Chinese organization could “undermine” the UK’s ability to produce complex semiconductors.

Similarly, in February this year, SoftBank abandoned its planned sale of Cambridge-based chip maker Arm to Nvidia.

When first announced in September 2020, the £29.6 billion deal was the largest in the history of the semiconductor industry. The proposed sale faced significant regulatory hurdles in the UK, the United States and the European Union.

At the time, the DCMS called for an investigation into the merger on national security grounds.

An investigation by the Competition and Markets Authority (CMA) later ruled that the takeover could lead to a “significant lessening of competition”.

EU- and US-based regulators have also argued that the merger could raise chip prices, reduce competition and stifle innovation in the industry.