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Techworks urges HM Treasury to boost UK semiconductor sector
Mon, 11th Mar 2024

Before the Chancellor's Budget this week, Techworks, the UK Deep Tech and Semiconductor Trade Association, calls for HM Treasury to develop effective systems that support the UK semiconductor sector. This support is seen as essential for the sector's global competitiveness and sustains the full development cycle: from Innovation, to Product Design and scaling up Manufacturing and supply.

The UK, despite strained budgets, lower productivity, and a significant trade deficit, continues to show impressive progress in the fields of science and technology, with a focus on universities and early-stage start-ups. Across the UK, there are many small to middle chip companies involved in profitable international businesses. However, unlike other countries, there's a reluctance to invest significantly in high-tech industrial growth. The general preference has been to monetise existing assets through external investors. Such an approach is viewed as a mistake, with urgent calls for investments across the UK in future-securing technologies now.

Semiconductors have been described as the enablers for future society in emergent applications such as AI, Telecommunications, Quantum, Engineering biology, Blockchain, Crypto-currency and many other technologies. There's a perception that the UK striving to become a significant player in these emergent technologies, generating high GDP, cannot be achieved without a robust domestic semiconductor sector that fuels necessary innovation and supply chains.

Currently, the UK offers the lowest level of incentives to the semiconductor industry among the G7. This lack of support creates an uneven playing field where international competitors are effectively subsidised to compete against UK businesses. Many countries have schemes to stimulate domestic demand, guaranteeing baseline business—these sectors create high-value jobs across all skill levels and almost an additional six jobs in the wider economy for each chip employee.

In the UK, while there is private investment and government funding available for early-stage research and innovation projects. There's a significant gap in private or public money available to support later-stage growth as companies scale up to become globally competitive. This gap often leads promising businesses to be acquired by foreign buyers, which often results in technology and jobs being lost overseas.

There's a call for greater governmental support across all stages of business growth. Charles Sturman, CEO of Techworks, and chair of TechWorks Semiconductor Leadership Group (SLG), said, "Society, geopolitics, economies, and whole industries are being transformed by emerging (deep) technologies, and these transformations are enabled by the semiconductor industry. UK Chip manufacturers and vendors need a level playing field to compete globally and this means, as a minimum, a support mechanism for capital expenditure and access to finance for the necessary step-up expenditure to remain competitive."

The UK, while not trying to compete with ultra-high volume chip manufacturers in the Far East, does have world-leading companies who export millions of chips in vital new markets such as power electronics for EVs & renewable energy, 5G radio communications, photonics for augmented reality and high-performance computing, and MEMS for sensors in life science, automotive & robotics.

To scale and hold onto their market lead, these companies need support, which is challenging to find from traditional UK financial markets due to their long-term, capital-intensive nature. Investors' lack of market understanding and preference for short-term, low-risk gain has presented hurdles for these businesses. However, in the long term, when appropriately invested in, these companies have the capability to grow successfully and be highly protected from competition.

The call to the treasury ahead of the Chancellor's Budget includes a list of targeted measures: changes to Capex rules to allow for significant capex recovery when investing in strategic upgrades to semiconductor manufacturing; creating a matched funding or lead investor scheme for strategic upgrades to UK facilities; incentivising domestic demand to increase UK business collaboration and national resilience; and, increasing the supply of engineers and technicians through apprenticeship reform.

Charles Sturman added: "The Chancellor’s Budget is an opportunity for the government to show that it recognises the challenges faced by the UK’s semiconductor sector and is prepared to support this strategic industry, as was indicated in the government’s own strategy published last May. This is an opportunity to invest for our country’s future and to help UK high-tech business remain globally competitive."