The UK’s National Semiconductor Strategy, launched in May 2023 with a £1 billion commitment, marked a significant step toward strengthening Britain’s position in the global semiconductor ecosystem. However, as we approach the strategy’s second anniversary, critical gaps remain that could undermine the UK’s ambitions to become a semiconductor powerhouse.
Drawing from recent industry analysis and government data, this assessment identifies five fundamental areas where the strategy falls short of what’s needed for long-term competitiveness.
The Manufacturing Reality Check
Perhaps the most glaring omission in the UK’s approach is its insufficient attention to manufacturing capabilities beyond niche applications. While the strategy correctly identifies the UK’s strengths in design and R&D, over 90% of advanced manufacturing and 20% of global manufacturing capacity is located on the island of Taiwan, creating severe supply chain vulnerabilities.
The UK’s response has been to focus primarily on compound semiconductors and emerging technologies, but this narrow approach leaves significant gaps. There is broad consensus among strategic stakeholders that the UK should focus on leveraging its strengths in R&D, Design and IP, and that the UK’s manufacturing efforts should be directed towards establishing and scaling earlier stage emerging technologies.
However, this consensus may be too conservative. The strategy lacks a clear pathway for developing mid-scale manufacturing capabilities that could serve as stepping stones to larger fabrication capacity. The absence of a concrete plan for establishing even modest fabrication facilities means the UK remains entirely dependent on foreign manufacturing for critical applications.
While building cutting-edge fabs to compete with TSMC would be prohibitively expensive, the strategy should have included provisions for establishing smaller-scale manufacturing capabilities for specific applications, particularly in defence and critical infrastructure sectors.
Scale-Up Support Deficit
The UK semiconductor sector is characterised by numerous small-to-medium enterprises with strong technical capabilities but limited scaling support. Medium-sized semiconductor companies are a significant segment of the UK sector.
Supporting these companies to scale will help to mitigate market concentration risks and address a perceived gap in scale up support. Yet the current strategy provides insufficient mechanisms to bridge the “valley of death” between promising research and commercial viability.
The £200 million allocated for 2023-2025 represents a fraction of what competitors are investing. The EU’s Chips Act commits €43 billion, while the US CHIPS and Science Act provides $52 billion. Even accounting for different economic scales, the UK’s investment appears inadequate for meaningful transformation of the sector.
More critically, the strategy lacks targeted support for the specific challenges facing UK semiconductor companies during scale-up phases. These include access to patient capital, assistance with regulatory compliance across multiple jurisdictions, and support for establishing international partnerships. Without addressing these fundamental barriers, many promising UK companies will continue to be acquired by foreign competitors before reaching commercial scale.
Related: How Semiconductors Became a National Security Issue.
Data-Driven Strategy Limitations
Recent analysis has revealed significant weaknesses in the evidence base underlying the semiconductor strategy. A new semiconductor sector analysis from DSIT (2024) confirms the limits of the original study supporting the NSS…
Without a thorough and continually updated understanding of the entire semiconductor ecosystem, the strategy risks misallocating resources and missing opportunities for growth. The original strategy was developed with incomplete mapping of the UK’s semiconductor ecosystem. This has led to potential misallocation of resources and missed opportunities to support emerging clusters.
The strategy would benefit from establishing a comprehensive, regularly updated database of UK semiconductor capabilities, including detailed mapping of supply chains, skills concentrations, and research capabilities. Furthermore, the strategy lacks sufficient metrics for measuring progress beyond basic economic indicators.
Without clear benchmarks for technological advancement, international competitiveness, and supply chain resilience, it’s difficult to assess whether the strategy is achieving its objectives or requires course correction.
Skills and Talent Pipeline Shortcomings
While the strategy acknowledges the importance of skills development, it underestimates the magnitude of the challenge. The semiconductor industry requires highly specialised expertise across multiple disciplines, from materials science to advanced packaging.
The current approach relies heavily on existing university programmes and generic STEM initiatives, but lacks targeted interventions to address specific skills gaps.International competition for semiconductor talent is intense, with countries like Singapore, South Korea, and Taiwan offering attractive packages to attract global expertise.
The UK strategy provides limited detail on how it will compete for top-tier international talent or prevent brain drain of domestic expertise.The strategy also fails to address the critical need for technical and operational skills at the manufacturing level. Even if the UK focuses primarily on design and R&D, it will still need technicians, process engineers, and manufacturing specialists to support pilot production and prototyping facilities.
International Cooperation Paradox
Perhaps most concerning is the strategy’s approach to international cooperation. While acknowledging the global nature of semiconductor supply chains, the strategy appears to prioritise selective partnerships over comprehensive engagement.
UKRI and the Japan Science and Technology Agency will work on up to £2m in semiconductor research in 2024, but such small-scale collaborations are insufficient for meaningful technology transfer or market access. The strategy fails to articulate how the UK will balance security concerns with the need for international collaboration.
This is particularly problematic given the increasing geo-politisation of semiconductor technology. Without clear principles for engagement with different international partners, UK companies may find themselves excluded from global value chains or forced to make difficult choices between market access and regulatory compliance.
The Innovation Ecosystem Gap
The strategy underestimates the importance of creating comprehensive innovation ecosystems that connect research, industry, and government. Identify semiconductor clusters for additional support, this will be vital to create global centres of excellence in the UK.
Examples already exist in compound semiconductors in Wales, around Bristol and in the Cambridge cluster. However, the strategy lacks concrete mechanisms for fostering collaboration between these clusters and creating synergies.
Successful semiconductor ecosystems require more than just physical proximity of companies and research institutions. They need shared infrastructure, collaborative R&D programmes, common standards development, and integrated supply chains. The UK strategy provides limited detail on how it will create these deeper forms of collaboration.
Recommendations for Strategic Enhancement
To address these gaps, the UK should consider several strategic enhancements:First, establish a semiconductor manufacturing capability fund specifically targeted at mid-scale production facilities for critical applications.
This need not compete with leading-edge manufacturing but should ensure supply chain resilience for key sectors.Second, create a comprehensive scale-up support programme that addresses the specific needs of semiconductor companies, including access to patient capital, regulatory support, and international partnership facilitation.
Third, implement a robust data collection and analysis system to continuously monitor the semiconductor ecosystem and adjust strategy accordingly. Fourth, develop a targeted international talent attraction programme specifically for semiconductor expertise, complemented by expanded domestic training programmes. Finally, establish clear principles for international cooperation that balance security concerns with the need for global engagement, providing certainty for UK companies operating in international markets.
In conclusion, The UK’s National Semiconductor Strategy represents an important first step, but it requires significant enhancement to achieve its ambitious goals. The UK has a “niche and highly specialised chip industry” that is never going to be able to compete head-to-head with global big hitters like the US, Taiwan, and Korea, meaning the country needs to channel investment into areas where it can lead. Success will require more than just financial investment; it demands a comprehensive approach that addresses manufacturing capabilities, scale-up support, data-driven decision making, skills development, and international cooperation.
Without these enhancements, the UK risks falling further behind in one of the most strategically important technology sectors of the 21st century.The window of opportunity remains open, but it is narrowing rapidly as other nations accelerate their semiconductor investments. The UK must act decisively to address these strategic gaps if it hopes to secure a meaningful position in the global semiconductor landscape.
