UK government dribbles out cash for semiconductors

UK science minister Lord Patrick Vallance on Thursday announced that Innovate UK will provide an £11.5 million pot of grants to be shared by 16 projects linked to the semiconductor industry – we're talking university-led research projects in areas including blue light lasers and shortwave infrared (SWIR) sensors, to name a couple highlighted by the government.

The announcement from the Department for Science, Innovation and Technology – Vallance also made it in person ahead of a G7 semiconductors working group meeting at Arm's headquarters in Cambridge, incidentally – did not split out the actual funding allocated to each project. But it doesn't take a maths whizz to realise that it works out at less than £1 million each on average; £718,750, to be exact.

While the money is doubtless highly welcome to the projects in question, it is difficult to reconcile that level of spend alongside the government's high-profile semiconductor ambitions and its claims about the UK industry as a whole.

The very same DSIT and Innovate UK announcement also included details of a new report the state commissioned from Perspective Economics, the headline finding of which is that the UK semiconductor space is valued at almost £10 billion and could grow to £17 billion by 2030.

Specifically, the report states that there are 210 dedicated semiconductor companies in the UK in research design and manufacturing, and together they generated £9.6 billion in revenues in 2022; Arm is the largest, accounting for 25% of revenues and 20% of employment.

While that seems like a pretty sizeable figure, it represents just 2% of global semiconductor revenues. And that in turn makes all the UK government's talk of technology leadership in this space look a little thin.

The previous government unveiled its National Semiconductor Strategy in May last year with a view to growing the UK semiconductor sector, mitigating the risk of supply chain disruption, and protecting national security.

"Over the next 20 years, the UK will secure areas of world leading strength in the semiconductor technologies of the future by focusing on our strengths in R&D, design and IP, and compound semiconductors," it said at the time.

And it backed its ambitions with a pledge to spend £1 billion over 10 years, including £200 million in phase one, the 2023-2025 timeframe. Amongst other things, the money is to be spent on R&D.

Even then that investment figure did not look sufficient to position the UK at the forefront of the semiconductor space, even taking into account the government's use of the phrase "areas of...strength" to caveat its ambitions. We were already looking at an €11 billion semiconductor funding commitment from the European Union, a $52 billion semiconductors budget in the US (including $11 billion worth of R&D), and talk of China spending $143 billion over five years to support chip production and research.

Little has changed in the UK in the interim to suggest that the picture looks any different. There is money going into semiconductors – as Thursday's announcement attests – but it is coming in dribs and drabs.

Nonetheless, the political posturing continues.

"Semiconductors are an unseen but vital component in so many of the technologies we rely on in our lives and backing UK innovators offers a real opportunity to grow these firms into industry leaders, strengthening our £10 billion sector and ensuring it drives economic growth," Vallance said.

"Hosting the G7 semiconductors Points of Contact group is also a chance to showcase the UK's competitive and growing sector and make clear our commitment to keeping the UK at the forefront of advancing technology," the minister added.

All of which suggests we will hear more from DSIT on semiconductors in the coming months and years, but a serious financial commitment to the sector is unlikely.