Brit chip industry wonders if UK budget will put its money where its silicon is
- Reference: 1709643472
- News link: https://www.theregister.co.uk/2024/03/05/brit_chip_industry_budget/
- Source link:
While the mainstream media speculates endlessly about tax cuts, [1]Techworks calls on the Chancellor of the Exchequer – the UK finance minister – to address in tomorrow's annual budget the lack of investment that chip companies need to grow beyond the startup phase in Britain.
The UK offers the lowest level of incentives to its semiconductor industry among the G7, the organization claims, meaning that overseas operations are effectively being subsidized to unfairly compete against British chip companies.
[2]
The nation punches above its weight in research and innovation via universities and early stage startups. Yet there is a lack of funding to support later stage growth of companies to scale up and become globally competitive, Techworks says, which often leads to promising businesses being snapped up by foreign investors, with the technology and jobs being lost abroad.
[3]
[4]
Among the measures Techworks would like to see are changes to capital expenditure rules to allow semiconductor companies to claim back more strategic investment spending. At present, expensing R&D Tax Credits is capped at 25 percent against profits and only for new equipment, it claims.
Also called for are efforts to stimulate investment by the creation of a matched funding or lead investor scheme in support of vital upgrades to infrastructure and facilities, and for government institutions to lead the financial markets in improving access to long-term capital that will allow chip companies to scale up.
[5]
Techworks CEO Charles Sturman said UK chip makers need a level playing field to compete and this means support and access to finance for the necessary expenditure to remain competitive.
"The Chancellor's Budget is an opportunity for the government to show that it recognizes the challenges faced by the UK's semiconductor sector and is prepared to get behind it to support this strategic industry, as was indicated in the government's own strategy published last May," he said.
[6]Brit bendy chip firm Pragmatic scores funding to boost production
[7]The UK government? On the right track with its semiconductor strategy?
[8]UK government's semiconductor brain trust meets for the first time
[9]Semiconductor execs try to push UK government to do more for industry
That long overdue [10]semiconductor strategy promised £1 billion ($1.26 billion) in funding over the next decade to be targeted at areas seen as the country's strengths, such as chip design and IP, R&D, and compound semiconductors.
This was greeted with disappointment by many, when compared with the billions being poured into subsidies and other incentives by the US and EU to boost their local semiconductor industries.
However, some voices, including Techworks' own Semiconductor Leadership Group, [11]broadly backed the strategy as being a tentative step in the right direction, while [12]other experts said the UK was right to pick its fights instead of simply pumping money into massive chipmaking subsidies.
[13]
Techworks says that while the UK does not try to compete with the high volume chip manufacturers like TSMC in the Far East, it has world-class companies that export millions of chips targeting important new markets including power electronics for vehicles, 5G radio communications, photonics, and MEMS (micro electromechanical systems) for sensors in fields such as life sciences, the automotive industry, and robotics.
In other words, the UK has a diverse semiconductor sector that has the potential for greater success with the right government support.
However, as if to highlight the government's poor record in this area, news broke this week that it has [14]finally approved the [15]sale of Newport Wafer Fab , the UK's largest semiconductor manufacturer, to Vishay Intertechnology, based in Pennsylvania, after its former owners were ordered to sell.
A former Inmos manufacturing site, Newport Wafer Fab was sold to Dutch semiconductor outfit Nexperia in 2021. However, Nexperia itself was already owned by Wingtech Technology, a partially state-owned Chinese operation, which caused the UK government to [16]unpick the sale using its powers under the National Security and Investment Act (NSIA).
The move means that despite a period of crippling uncertainty and [17]warnings from Nexperia that forcing the sale of the facility would have a devastating impact on Newport's financial position, the site has ended up in foreign ownership anyway. ®
Get our [18]Tech Resources
[1] https://www.techworks.org.uk/
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZedPuC7vvyePyvsHIMUdjQAAAcM&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZedPuC7vvyePyvsHIMUdjQAAAcM&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZedPuC7vvyePyvsHIMUdjQAAAcM&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZedPuC7vvyePyvsHIMUdjQAAAcM&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://www.theregister.com/2023/12/06/brit_chip_firm_pragmatic_scores/
[7] https://www.theregister.com/2023/10/31/uk_semiconductor_strategy/
[8] https://www.theregister.com/2023/08/03/uk_govt_semiconductor_panel/
[9] https://www.theregister.com/2023/07/03/industry_execs_say_uk_gov/
[10] https://www.theregister.com/2023/05/19/uk_1b_semiconductor_strategy/
[11] https://www.theregister.com/2023/07/03/industry_execs_say_uk_gov/
[12] https://www.theregister.com/2023/10/31/uk_semiconductor_strategy/
[13] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZedPuC7vvyePyvsHIMUdjQAAAcM&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[14] https://www.thetimes.co.uk/article/sale-of-newport-wafer-fab-for-177m-approved-kp3wkks5j
[15] https://www.theregister.com/2023/11/09/nexperia_sells_newport_wafer_fab/
[16] https://www.theregister.com/2022/11/17/uk_forces_newport_fab_sale/
[17] https://www.theregister.com/2023/09/06/newport_wafer_fab_blames_government/
[18] https://whitepapers.theregister.com/
Situation Normal
Unless we are talking about McCain oven chips, I wasn't aware we had a significant chip industry. I read the article and I remain to be convinced.
Re: Situation Normal
The UK does not have ANY significant industrial capacity any more. It’s gone. Thatcher started dismantling it, Blaire continued it. It’s over. The UK is now a “services” power house (giggle, snort)
Apologies, but what’s left? Even the strategic nuclear power plants are foreign…
Re: Situation Normal
And the service sector had an arm lopped off by the Brexit vote.
Change of direction is needed. The relevant parties aren't making any convincing noises about this.
Re: Situation Normal
Please define what you mean by 'industrial capacity'.
If you are referring to manufacturing capability, your assertion is commonly expressed, but is wrong.
The UK remains a major global manufacturing nation - around the 8th to 9th most important (depending on year)
https://worldpopulationreview.com/country-rankings/manufacturing-by-country.
That is certainly not to say that everything is rosy, and it is the case that the traditional 'heavy industries' of steel manufacture, ship building and (to a lesser degree) car making have significantly contracted. That is in part due to the policies of various governments, but is mostly because other nations can do this stuff cheaper (and in some cases at least, better) than we can. However, even in these fields, we have not lost all capability (though that does seem to be the intent at the moment, with regard to steel making).
Unless military supply chains are threatened, expect no support. And even then...
Steelworks, that traditional last bastion of "we need our own production capability" were allowed to go to the dogs. At a time we're we are seeing the largest European war for 70 years.
It's not a coincidence, but our intelligence services are busy with manufactured culture wars or simply are sitting on their hands.
I wouldn't be surprised if the destruction of steelworks was driven by a few people with second salary from one of our adversaries, basically saying: steel is a thing of the past, modern wars are fought with AI , lasers and drones and fools in government accepted it.
Fair point, well made. The incumbents seems to have a penchant for "everything" has to make a profit or let it rot.
This is true to an extent, but not every decision should be made on cash grounds. A working postal system for example, or infrastructure.
If our chips are that good...
...they should be able to bag investment. Investors don't turn down a good deal.
There is going to be less tech to invest in, in the future. Once the AI bubble bursts in a year or two, the way the Metaverse and NFT bubbles did, most likely courtesy of government restrictions, the UK's chip producers should find it easier to bag cash, at least from abroad. Since Sterling declined at Brexit, the UK is too poor for this stuff, but it is cheap enough for incoming cash, from any country/company the government doesn't ban from investing.
Brexit Britain is at least 25% (the decline in Sterling) and possibly one third poorer than it used to be. Politicians used to worry about Sterling going down 1%. And it was often dependent upon foreign cash even before Brexit. Money from abroad is going to be essential for investment in the future. Most of our car and steel industries are now owned by foreign companies and SoftBank bought ARM. Poor countries rely on others. The UK is good at innovation but has been badly run by governments for decades, and that is unlikely to change. Accept it and move on.
A lot of poor countries are developing. Brexit Britain is undeveloping (councils going bust, services collapsing). It will be a fight to compete with them, but being dependent upon state handouts will merely create a tech version of British Leyland. And that's not a good thing. We are not an Imperial power any more. Wake up and smell the coffee. Get out there into the global market and bag some investment. If the US and UK governments don't block it, you'll be OK.
Re: If our chips are that good...
Your assumption would be correct if we have good environment for business.
Unfortunately current government is hostile towards SMEs and regardless of how good the product is, it's basically not investable.
More realistic scenario is that any entrepreneurs with IP that is worth something would rather incorporate elsewhere.
Get out there into the global market and bag some investment.
Most of people I know done exactly that - moved to the US and developed their business there.
“lack of funding to support later stage growth … to scale up and become globally competitive”
Well with Brexit we don’t need the funding, as there is no “home” market to support the required growth…
Remember on the of the big business/economic reasons the UK (Thatcher) government initially pushed for the Common Market and then lead the formation of the Single Market was to create a protected market (*) in which UK companies could grow and scale up to become globally competitive…
With respect to chip foundries, well being outside the EU meant the UK missed out on the EU monies to be the host of an EU foundry…
(*) Yes protected, those trade barriers the Brexiteers went on and on about were there for a reason - to benefit UK interests !
Re: “lack of funding to support later stage growth … to scale up and become globally competitive”
@Roland6
"With respect to chip foundries, well being outside the EU meant the UK missed out on the EU monies to be the host of an EU foundry…"
So we dont get a polluting foundry (greenies will be happy). At least the UK wont be net contributing to this when we already have high energy costs and are uncompetitive with Asian foundries. Instead thanks to brexit the US and EU can pump tax payer money into competing with Asian foundries and the UK get cheap chips. Sounds like a win.
"(*) Yes protected, those trade barriers the Brexiteers went on and on about were there for a reason - to benefit UK interests !"
Just as the trade barriers that borked our industries and brought us sub-par products until we got foreign cars, technology, etc.
Re: “lack of funding to support later stage growth … to scale up and become globally competitive”
and the UK get cheap chips. Sounds like a win
If you don't own the means of production, you are depending on those countries. They may be relatively friendly today but that is not a given.
The longer we don't have any meaningful high tech industry, we are losing more expertise and young people have no reason to study engineering if there are no jobs in that field.
This is essentially a managed decline.
Re: “lack of funding to support later stage growth … to scale up and become globally competitive”
"This is essentially a managed decline."
Mangled.
The UK offers the lowest level of incentives to any industry among the G7
FTFY
The UK is also probably only country that is de facto subsidising multinational big corporations by way of IR35 against its own domestic business.
The idea is that the UK should stick to fish and chips and leave silicon chips to China and India.