How can innovation drive the UK’s semiconductor future?

Imagine cutting global emissions by an amount equivalent to the entire aviation industry – this is the bold promise of UK company QPT. Its innovative use of Gallium nitride (GaN) in semiconductors has the potential to improve motor efficiency by 10%, impacting the automotive, heat pump, and robotics sectors. With the world moving towards electric cars and sustainable tech, this only highlights how important semiconductor innovation is for our future. But does the UK have the necessary support to fully harness the power of its innovative semiconductor industry?

The semiconductor ecosystem is complex, and is largely dominated by companies in Asia – particularly the largest manufacturer Taiwan Semiconductor Manufacturing Company (TSMC) – and the US giants like chip designer Nvidia. In comparison, the UK accounts for 0.5% of the semiconductor market. This might sound small, but the global market itself was $500 billion last year, making this significant to the UK economy.

In a move to strengthen the UK’s position, the previous government launched a National semiconductor strategy, committing £1 billion over 10 years to help the UK compete in the global market. This move came after considerable pressure from companies and academics, with some, like Pragmatic Semiconductor, threatening to relocate to the US if support was lacking.

While the strategy was welcomed as a first step, some experts still question whether this is sufficient to ensure the UK remains competitive in the semiconductor space. “The £1 billion pledged by the government in the strategy is a good start and shows commitment to developing the sector,” write Dr Patrick Schröder and Olivia O’Sullivan. “But it is significantly smaller than the support the US and EU are providing their industries. The US CHIPS and Science Act, introduced in 2022, provides nearly $53 billion for domestic research, development, and fabrication of semiconductors… Meanwhile, the EU’s Chips Act is a similar size, with €43 billion announced in 2022.”

Rupert Baines, CEO of QPT and a serial entrepreneur in the semiconductor space, told us he is “cautiously positive” about the UK’s semiconductor future, claiming that its success “depends on whether we seize the opportunity,” and adding emphasis to the importance of timely action and strategic focus.

Opportunities for growth: supply chain, talent, and scale

The UK’s semiconductor industry, though small, is not without its strengths. Baines highlights that while the UK lacks massive logic fabrication plants like TSMC or Intel, it excels in specialised manufacturing. Companies such as Plessey in Plymouth, which supplies chips for Meta’s Oculus VR headset, and key hubs in Newport are good examples of this, he says.

However, to truly compete globally, the UK needs to focus on three critical areas: improving supply chain resilience; developing diverse talent; and supporting the scaling of businesses. These priorities, outlined in the Semiconductors for Telecoms report from the UKTIN working group (which was chaired by Baines), are essential for the industry’s growth and competitiveness.

Baines highlights the problem of diversity within engineering, particularly in semiconductors and telecoms, where there is a significant shortage of young talent.

“One reason is the university system; these are expensive courses to run,” he says, pointing to the increase of Computer Science and AI courses in contrast to the more costly and less popular Electrical Engineering courses.

By 2030, it is expected that another one million workers will be needed in the semiconductor industry. The UK Electronics Skills Foundation (UKESF), of which Baines is a director, is addressing this gap by working to inspire the next generation. By partnering with universities and companies, UKESF is working on the talent pipeline the industry needs by teaching electronic skills.

Another significant hurdle is the scaling up of small and medium-sized enterprises (SMEs). The majority of UK semiconductor companies are SMEs, and the issues arise when these companies try to grow.

“There is a lot of support for early-stage start-ups and academic spin-outs, but not so much when companies are moving from a small company to a bigger enterprise,” says Baines. This is something he has actually experienced, having worked for companies like PicoChip in Bath and Ultrasoc in Cambridge, which were eventually sold to foreign firms due to difficulties in scaling.This issue is likely reflected in the recent challenges faced by Graphcore (who have been acquired by SoftBank), which, despite its growth to nearly 500 employees in just eight years, struggled with the “scale and level of investment” required to remain competitive, as CEO Nigel Toon pointed out.

Niche markets as a strategic focus

To establish a stronger position in the global market, the UK must focus on niche areas where it has a competitive advantage. Baines suggests that the UK should concentrate on specific chips and materials, such as silicon photonics, where it has a robust research foundation.

Recent developments in this field, particularly at the University of Southampton, demonstrate the UK’s potential to lead in high-speed communication technologies. This type of collaboration is exactly what is recommended by the UKTIN report on the competitiveness of the UK.

The potential benefits of such a focus are already being realised in emerging industries like quantum computing. For instance, Oxford Ionics has developed record-breaking quantum computing chips that do not require specialised manufacturing processes, significantly reducing costs and increasing accessibility. These chips will be integrated into the UK’s National Quantum Computing Centre, advancing the country’s quantum computing infrastructure and reinforcing its position as a leader in cutting-edge technologies.

By capitalising on these niche areas, the UK can enhance its technological capabilities and secure a more substantial position in the global semiconductor market. And with companies like QPT driving impressive innovations in energy efficiency, with potentially significant impacts on the road to net zero, there is always a chance to inspire further innovations. But to unlock this potential, the UK must address critical issues, and focus on its strengths in niche markets. While the global industry may be at a crossroads, the UK still has an opportunity to turn potential into reality.