What does the future look like? Semiconductors

The global semiconductor industry is a bit like a secret society.

These tiny, intricate chips power nearly everything—your phone, your electric vehicle, even the lamppost outside.

Yet, unless you’re an industry insider, you’ve probably never thought much about them.

But with the 2021 semiconductor supply chain crisis costing the global economy 1% of GDP, these unsung heroes of modern technology are suddenly at the centre of a global power struggle.

The UK’s semiconductor sector, valued at £9.6 billion in 2022 and employing 15,000 people directly, plays a modest but vital role in this high-stakes game.

Still, as I’ve been learning, untangling the UK’s position in this ecosystem feels a bit like solving a Rubik’s Cube—fascinating but definitely not straightforward.

The UK’s Silicon Strengths—and Weaknesses

Let’s start with the obvious: the UK isn’t Taiwan or South Korea. Our £9.6 billion semiconductor industry accounts for just 2% of global revenues. What we do have, though, is Arm—a Cambridge-based juggernaut whose chip designs are found in 99% of the world’s smartphones. Arm alone generates 25% of the UK chip industry’s revenue and employs 20% of its workforce, highlighting the UK’s global significance in design.

Despite these strengths, the UK’s semiconductor sector is vulnerable to supply chain disruptions, heavily reliant on imports, and lacks the broad manufacturing base seen in Germany or the US. This design-heavy, manufacturing-light profile makes us susceptible to global shocks, as seen during the pandemic.

Opportunities: A Silicon Revival in the Making?

The UK’s niche expertise in compound semiconductors—vital for power electronics, renewable energy systems, and 6G networks—could be our ace in the hole. South Wales, home to a growing compound semiconductor cluster, exemplifies this potential. The UK government’s £1 billion National Semiconductor Strategy aims to build on these strengths, though it’s a modest sum compared to the $52 billion and €43 billion invested by the US and EU, respectively.

The strategy focuses on mitigating supply chain risks, prioritizing critical sectors like healthcare and defense, and fostering international partnerships. However, with future revenue scenarios estimating growth to £13–£17 billion by 2030, stakeholders argue that bolder and more coordinated action is urgently needed.

Skills: The Chips Are Down

Semiconductors are as much about talent as they are about technology. The UK sector employs 15,000 people directly, and an estimated 86,000 jobs are supported indirectly across the wider economy. However, there’s a glaring skills gap. The industry needs integrated circuit (IC) design engineers, R&D scientists, and manufacturing technicians, but over 90% of companies report moderate to acute shortages. With only 20% of UK computer science graduates being women—compared to 50% in India—diversity could also be a key lever for growth.

Encouragingly, retraining programs and cross-sector collaborations are making strides. For instance, initiatives in South Wales are retraining steelworkers for semiconductor jobs, offering a win-win for regions in need of industrial renewal.

The Role of Government: Money Talks

The UK’s semiconductor sector has attracted £1.7 billion in grants and fundraisings to date, but 70% of this has gone to just five companies. Medium-sized firms, which employ 33% of the workforce, are critical for growth, yet they face barriers like a lack of scale-up funding and technical investor understanding.

To punch above its weight, the UK must focus on targeted investments in areas like open-access foundries, which can manufacture chips locally and reduce reliance on foreign fabs. As Andy Sellars from Silicon Catalyst notes, establishing a National Semiconductor Institute could provide much-needed leadership and coordination.

International Partnerships: Playing the Long Game

Semiconductors are a global business, and the UK operates in 65 countries through 623 companies, highlighting its international footprint. However, 75% of companies say they rely on imports for production, and diversifying supply chains is hampered by the high cost and limited availability of UK alternatives.

The UK’s focus should be on building strategic partnerships, particularly with countries like India and the US, while safeguarding intellectual property—a delicate balancing act in a fiercely competitive industry.

A Silicon Strategy for the Future

Semiconductors underpin everything from AI to quantum computing to electric vehicles. The UK has the brains and ambition but needs clearer policies and stronger coordination. By doubling down on design, compound materials, and emerging technologies, and addressing skills gaps and funding shortfalls, the UK could transform from a niche player to a serious contender.

The chips are down, but with the right moves, the UK might just play a winning hand.