Ministers plan a British electronics revolution to protect the country if China invades Taiwan and cripples the global microchip market.
Chancellor Jeremy Hunt and Science Secretary Michelle Donelan are developing a “semiconductor strategy” as part of wider moves to reduce the UK’s reliance on the Asian market for vital electronic components.
Taiwan – which China considers a breakaway “province” that will eventually be brought under Beijing’s control, by force if necessary – produces 90% of the world’s most advanced microchips used in smartphones, computers, cars and the military equipment.
Chinese President Xi Jinping has said ‘reunification’ with the island, which lies just 100 miles off China’s southeast coast, ‘must be achieved’, and staged a series of shows of force military in the Taiwan Strait.
Culture Secretary Michelle Donelan speaking at the Conservative Party’s annual conference
Employees work at a semiconductor factory in Hsinchu, Taiwan
US intelligence says he has ordered his army to be ready to invade by 2027 in an assault that would involve the largest amphibious invasion force since the Allied D-Day landings. But the US fear that military force will be deployed as early as 2025, after the next US presidential election.
Allowing Taiwan’s electronics industry to fall into Chinese hands would be a huge strategic blow for the West.
The UK’s reliance on foreign microchips became evident when the Covid crisis caused an acute disruption to supply chains, prompting a scramble within Whitehall to boost domestic production.
A senior government source said: “We are working on a so-called ‘coil spring’ model, which will focus on our strengths in semiconductor design and invest in research and development, while striking new deals. international relations with Western allies such as the United States, Japan and the Netherlands.
“The ultimate goal is to create a UK semiconductor manufacturing industry.”
The move will likely spark a fight for the most talented experts in the field with the United States, which has also pledged to boost its microchip industry.
Last year, President Joe Biden allocated $52bn (£43bn) to promote microchip production and help ‘win economic competition in the 21st century’. US Commerce Secretary Gina Raimondo said: “Our reliance on Taiwan for chips is unsustainable and dangerous.”
Taiwan makes 65% of the world’s semiconductors and nearly 90% of advanced chips, for customers like Apple. China has also been trying to boost its semiconductor manufacturing capacity, recently pledging £123 billion to expand the industry.
UK tech companies are mainly clustered in the so-called Silicon Fen around Cambridge.
No date has yet been set for the announcement of the new strategy, with funding levels still being negotiated at the Treasury.
Efforts to put in place a semiconductor strategy come after the sector has been sabotaged by years of neglect, experts warn
By Luke Barr and Francesca Washtell deputy city editor
Efforts to put in place a UK semiconductor strategy have been sabotaged by years of neglect.
The industry has repeatedly asked ministers to roll out a comprehensive plan which provides details on areas such as funding and job training.
The government has also come under fire for allowing Britain’s biggest semiconductor maker, Newport Wafer Fab, to be sold to a Chinese buyer in 2021 without any scrutiny. This was later canceled following an outcry from MPs and security experts.
But the lack of clear support for the sector has led to a dearth of keen investors and prompted innovative companies to look abroad to set up their businesses and attract funding.
Chancellor Jeremy Hunt is drawing up a ‘semiconductor strategy’ as part of wider moves to reduce the UK’s reliance on the Asian market for vital electronics
Lack of confidence in the industry was laid bare earlier this month when Cambridge-based chip designer ARM Holdings, the gem of the UK semiconductor sector, scrapped a stock market listing in London in favor of New York. It was a blow for the City after Treasury and London Stock Exchange officials spent months wooing ARM owner Japan’s SoftBank.
The government has previously pledged to release a semiconductor strategy, but nothing has been announced. A report from the Business, Energy and Industrial Strategy Committee highlighted that it had been ‘already two years in the making’ and said it ‘needs to be published urgently’, with MPs adding that the delay was “difficult to understand”.
The lack of a domestic industry has left UK manufacturers, including some of Britain’s biggest automakers, exposed to global shortages after chip supplies were cut off during the pandemic. Semiconductors are essential to all modern electronic systems. Even before Covid, there was a shortage of factories around the world to meet the growing demand for chips in everything from “smart” fridges to cellphones.
But there are also shortages of key components such as silicon components and rare earth metals. China controls the supply of much of this material.
The government said earlier this year it was in ‘discussions with like-minded countries’ to help boost the UK’s semiconductor capabilities, but a full plan has yet to be announced. deployed. Whitehall has been urged to work more closely with allies in the EU and US to safeguard future semiconductor supplies.
Industry source: “I don’t think the UK can compete financially with the US.”
He added that it would be “impossible” for Britain to match the manufacturing capabilities of the United States and China.