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LONDON — Rishi Sunak is preparing to pledge just £1 billion to the U.K.'s fledgling microchip industry as American and European governments shore up their supply chains with massive subsidy packages worth tens of billions of dollars.
Four figures with direct knowledge of the process say the total government funding is expected to be worth £1 billion. One person said the deal was done, but two others insisted this figure could yet change in the next few weeks.
The prime minister is hoping to unveil the long-awaited semiconductor strategy, which had been due last fall, at next month’s meeting of the Group of Seven (G7) leaders in Japan.
One figure with direct knowledge of the discussions said Chancellor Jeremy Hunt and the Department for Science, Innovation and Technology were “working towards” a figure of around £1 billion, although cautioned this could still be revised in the weeks ahead. A second figure directly involved in talks said the billion mark was “along the right lines,” but also stressed an agreement between the Treasury and departments is not yet final.
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DSIT has been pushing for a higher figure given U.S. and EU leaders have backed their own semiconductor plans with huge fiscal firepower.
Chips power everything from iPhones to missiles, but the COVID-19 pandemic exposed the world’s reliance on Chinese and Taiwanese manufacturers. The threat of war in Taiwan, home to TSMC, the world's largest semiconductor company, has made Western governments even more desperate to shore up their supply chains.
The U.S. is spending more than $52 billion on its semiconductor plans, which will see it invest in manufacturing grants, research, and investment tax credits. The EU package, which was given the green light earlier this month, is worth more than €40 billion and aims to boost microchips production, loosen rules to allow more government subsidies for advanced chip facilities, invest in EU microchips research and development, and provide tools to monitor potential supply shortages.
One British chipmaker, Pragmatic Semiconductor, is considering moving operations overseas if the U.K. fails to produce a strategy which funds more domestic chip production, Bloomberg reported on Tuesday. The company, which has been backed by the CIA’s venture capital arm, may take more funding from China, or look to the U.S., its founder, Scott White, said in an interview.
‘Good shape’
Chancellor Jeremy Hunt appeared to lower expectations of a major U.K. funding package last week, telling POLITICO the U.K. faces a strategic choice between doing this “on our own” and building up “resilient supply chains that we know will weather any global storms that we face.”
He warned other finance ministers it would be a “big step backwards if we start putting up protectionist barriers for all our critical technologies.”
Instead of getting into a subsidy race, the U.K. strategy is expected to focus on how to scale up chip designers and manufacturers, secure supply chains and address skills shortages.
A government official said the U.K. plan was in “good shape” and should be expected “soon.” And No. 10 officials have been telling industry representatives that Sunak has been fully engaged with Britain’s plans, which are central to his vow to make the country a science and technology superpower.
Industry figures want the strategy to outline the government’s security concerns around the U.K.’s biggest semiconductor plant, Newport Wafer Fab, which was bought in 2021 by Dutch firm Nexperia, whose parent company is Chinese. The U.K. government later blocked the deal on national security grounds and Nexperia is challenging this in the courts.
The prime minister is due to travel to Hiroshima for the meeting of the leaders of the so-called G7 industrialized nations on May 19, and officials are in discussions about coinciding the announcement with the trip.
Technology Minister Paul Scully had been due to unveil the strategy last week, but it was delayed as Sunak weighed who would stand-in as DSIT chief while Michelle Donelan is on maternity leave.
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April 26, 2023 at 07:15PM
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UK’s Rishi Sunak lines up £1 billion chips strategy - POLITICO Europe
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