Ministers delay microchip factory plan until after election

Concerns grow over lack of action to support Britain’s semiconductor industry

Ministers have pushed back a decision on spending hundreds of millions of pounds on a flagship microchip facility until after the election, despite concerns about a lack of action to support the industry.
Semiconductor industry sources said they have been told not to expect progress on an “infrastructure initiative”, a central plank of the Government’s £1bn semiconductor strategy, until the next spending review, which will take place after the election.
The delay has sparked alarm, given the US and Europe are spending billions on boosting domestic manufacturing and supply chains in the increasingly crucial technology. Production is currently concentrated in Asia, a fact that is causing alarm given rising geopolitical tensions in the region.
There are concerns that Britain’s semiconductor industry will struggle without concerted Government support.
Draft versions of a report delivered to ministers said that a lack of skilled semiconductor engineers in the UK as well as low salaries threatened to hold back the industry.
“The UK is not attractive to international talent as it offers low salaries and has a high cost of living,” it said.
Ministers commissioned experts to draw up several options for semiconductor manufacturing facilities last year in a bid to bolster Britain’s manufacturing expertise.
The Department for Science, Innovation and Technology received the report at the start of this year.
The Telegraph understands that the report outlined a range of options including spending around £500m on a facility to produce conventional silicon-based microchips, as well as cheaper alternatives that included making advanced “compound” semiconductors, establishing a packaging facility and a design centre.
However, industry figures are divided on the next steps. An option to spend up to £500m on a fully-fledged compound facility, focused on advanced chips such as those used in electric cars, was removed from later versions of the report because of concerns it would compete with private companies.
Britain is seen as a frontrunner in this area of semiconductors.
The majority of semiconductor strategy funding to date has been made up of smaller grants to support specialist research.
Zachary Spiro, manager at policy consultancy Flint Global, said: “Given the Semiconductor Strategy was published in May last year, it’s a shame that the sector may now have to wait two years to find out how much of the promised £1bn will be spent, and what on.
“This delay is a result of the Treasury’s choice to push decisions on post-2025 spending until after the election, which could be as late as January next year. The UK industry and international investors would have hoped for a clearer horizon earlier than that.”
Announcing the semiconductor strategy last year, Rishi Sunak said it would prove “crucial to advancing the technologies of tomorrow”. Investment in capabilities would “grow our economy, create new jobs and [help the UK] stay at the forefront of new technological breakthroughs,” the prime minister said.
A government spokesman said: “Our Semiconductor Strategy is working. Backed by £1bn, it takes a targeted approach to growing the British sector and protecting national security by doubling down on our key strengths.
“In addition, we have provided UK chip makers access to the UK Infrastructure Bank’s £22bn investment pot – which has already enabled £60m investment in Pragmatic – and joined the Horizon Europe-backed Chip’s Joint Undertaking, securing access to a €1.3bn pot for UK scientists and researchers.”
While the UK birthed ARM, one of the world’s most successful semiconductor design businesses, the sector has struggled in the UK in recent years.
Apple supplier Imagination Technologies laid off 20pc in November, citing the “challenging and evolving environment”, while the future of Britain’s largest chip factory Newport Wafer Fab has been in limbo for years amid wrangling over its former Chinese-linked owners.
A sale to US electronics giant Vishay was cleared last month, ending the uncertainty.