UK expected to offer $1.25 billion for nation's semiconductor industry

A reported billion-pound subsidy for UK-based chipmaking falls short of US efforts, but follows similar logic in pushing for more domestic manufacturing capacity.

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UK Prime Minister Rishi Sunak is reportedly about to follow in the footsteps of the US and several European governments by announcing a funding package designed to build up the country’s domestic semiconductor industry, according to a report this week from Politico.

While the exact amount of the funding could change, according to Politico’s sources, a topline figure of £1 billion ($1.25 billion) is expected. The UK government’s Department for Science, Innovation and Technology is thought to be the prime mover behind the policy, and Sunak is said to be planning to unveil it in next month’s G7 meeting in Japan.

Nations build chipmaking capabilities

Government efforts to build domestic semiconductor manufacturing capacity have been spurred largely by the events of the pandemic, the 2022 Russian invasion of Ukraine and the ongoing US semiconductor trade dispute with China. The former event, thanks to the consequent enormous upsurge of remote work, created a new wave of semiconductor demand, highlighting the dependence of the global technology sector on foundries in East Asia. US policy dating back to the Trump administration then created a new set of barriers to exports from China, while the invasion of Ukraine further exacerbated strains on the global supply chain.

Hence, in an increasingly unsettled geopolitical situation, national governments whose countries depend on a large supply of computer chips have taken increasingly dramatic steps to either build new production capabilities or buttress existing ones. The US’ own CHIPS and Science Act, signed into law by President Biden last summer, appropriated more than $52 billion for a range of incentives, including $39 billion for manufacturing incentives designed to keep semiconductor fabs run by US companies in the country, and provide major sums in subsidy for companies looking to create new ones.

The UK’s plan would fit in with UK policy regarding the technology sector. During his Spring Statement, Chancellor of the Exchequer Jeremy Hunt announced several measures, including R&D support for small to midsize businesses in the form of tax credits, an annual $1.25 million award for excellence in AI research, and $3.12 billion in financial support for the government’s 10-year plan for quantum computing development. Additionally, the government plans to offer new childcare subsidies for tech workers, and to implement retraining initiatives designed to allow older workers to participate in the tech sector.

Copyright © 2023 IDG Communications, Inc.

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