What does the semiconductor industry need from the Government?

In this article, we explore what is needed of the UK Government when it comes to releasing a strong framework for semiconductor industry innovation

The UK Government’s goal to make the UK a “Science and Technology Superpower” is heartening, and to see semiconductors identified as one of the critical technologies in the recently published UK Science and Technology Framework even more so. However, there has been much reported criticism around delays and alleged distractions, which ministers responsible need to address. With this in mind, how can a framework for the semiconductor industry be accomplished?

For a start, it must now deliver details on what it means for the semiconductor sector. The UK Science and Technology Framework document points towards the UK’s vision for the semiconductor industry and intended outcomes, but crucially, the dots in between are still missing. We need clarity on the government’s vision, particularly its ambitions and where it will focus efforts to support the growing number of start-ups in the sector.

With this mind, I have a wishlist for the semiconductor strategy, which I hope the government will action:

1. Budget

Although it’s difficult not to look enviously at the commitments of the United States Government, the European Union, and China in the semiconductor manufacturing sector, the Government has made a significant 10-year commitment to the quantum computing industry (£2.5bn) and AI (£1bn). Will there be a similar level of commitment to the semiconductor industry? Clarity from the government will reassure companies (and the venture industry investing in companies like mine) and enable them to plan with greater predictability.

2. Compound Semiconductors as a focus area

Most people in the UK industry accept we cannot go toe-to-toe with the US and China on silicon-based semiconductor manufacturing. The UK must instead define a position in a sector that it can defend. The UK has world leading intellectual property (IP) in areas such as compound semiconductors, which are critical to applications such as 5G and 6G, LEDS, lasers, autonomous vehicles and satellite communications. Converting this IP into world-beating commercial entities is a great example of a route to creating the next generation of tech giants.

Key to our advantage in compound semiconductors is the strength of the ecosystem we have already established. The foundation for this is world class facilities such as National Epitaxy Facility and the EPSRC Centre 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 biggest manufacturer of compound semiconductors in the world.

I’d like to see a significant investment in research institutes, lab space and infrastructure. I would also like to see investment distributed across the UK. Clarity on the government’s vision and level of ambition is critical if we are to leverage this broad ecosystem to develop the next generation of successful companies.

3. A world-leading finance and investment ecosystem

The 10-point plan sets out an exciting vision to ensure there is a ‘sufficient supply of capital at all stages’ but few details are given on how this will be achieved. I believe the issue lies in a combination of financial, regulatory and cultural issues which need to be addressed.

Speaking of financial and regulatory challenges, the government has hinted at plans to unlock capital from defined contribution pension schemes which could see significant capital available for later stage funding rounds (Series A and B). This could give rise to more funds with significant firepower that typically exist outside of the UK, and it is certainly the right move. Attracting significant capital can be challenging for early stage start-ups. The core issue is that UK investors are risk adverse compared to other countries that are more comfortable with larger cheque sizes — the USA for example.

If the UK could enhance tax and investment incentives for deeptech (not just specifically semiconductor) start-ups it would set us apart. For example, the SEIS already offers up to £150,000 often used for pre-seed funding, but if this could be extended to £1.5m it would give capital intensive early-stage companies the cash they need to scale earlier while remaining in the UK.

4. Defending UK IP

Why haven’t we produced a Google or a Facebook?  It is a bit flippant to say we don’t have one because we keep selling them off (ARM and Deepmind, to name but two), and that begs the question how can we encourage companies and founders to grow, remain British and become the next Intel or Google? Such global companies become the genesis and engine for other technology companies to form around them.

The UK is building a strong pipeline of world-class semiconductor deeptech start-ups which we need to nurture. Today, the reality for many of these start-ups is that they will be acquired and the IP transferred, or further developed overseas. We need to change the environment to encourage semiconductor companies (jobs) to remain and grow in this country. It is also important we create the right balance between facilitating such acquisitions and creating the market conditions to ensure the UK remains attractive.

I do not claim to have the answers for how to achieve this aim, but what the Newport Wafer Fab shows is that we need clarity on acquisition regulation, as well as deciding when IP becomes a matter of national security and becomes key to the UK’s technology strategy.

5. Access to talent

One key area is growing the talent funnel. There is a shortage of highly qualified engineers, and more needs to be done to encourage students to take physics and electronics courses. Traditionally, the semiconductor industry has had a high barrier to entry with candidates requiring a degree. The strategy should outline alternative semiconductor career paths, such as supporting technician roles in electronics, computer science and photonics. Similarly, adjusting the visa scheme to enable more talent mobility will enhance the UK’s attractiveness.

6. Not all tech comes from the South East

I am proud that Phlux Technology has emerged from the University of Sheffield and is working with Octopus Ventures, Foresight Group and Northern Gritstone. It is clear there is real energy around the deeptech scene outside the golden triangle. However, by comparison to London and the South East, the North (and everywhere else outside the South East) receives far less investment. There is a huge opportunity, given the strength of the semiconductor industry outside that region for the government’s semiconductor strategy to reinforce the vision of levelling up. For the startup scene in the North to continue to flourish, it will require investment beyond technology and skills, in areas such as infrastructure connecting cities like Manchester, Leeds and Sheffield.

If we get the semiconductor strategy right, we have a real opportunity to position the UK as one of the most attractive hubs for the semiconductor industry in the world. Let’s hurry up and get on with it!

Ben White is co-founder and CEO of Phlux Technology.


Tech leaders call on UK government to deliver semiconductor strategyIn a letter to Prime Minister Rishi Sunak, tech leaders have asked the government to prepare and publish the UK’s semiconductor strategy as a matter of urgency.

£1.5m AI scheme launched by UK government to tackle carbon emissionsThe UK government has confirmed investment of £1.5m into a new AI innovation programme dedicated to reducing carbon emissions and helping the country achieve its net zero targets.