Report highlights shortcomings in UK chip plans

The UK needs to build on its relationship with South Korea to improve its semiconductor supply chain resiliency.

This is among the key findings in a report from the Centre for Emerging Technology and Security (CETaS), a research centre based at The Alan Turing Institute.

The Semiconductor supply chains, AI and economic statecraft report notes that the US, China, European Union (EU), India and South Korea have all put in place incentives to encourage chip manufacturing (fabs) as part of a broader industrial strategy.

“What binds the five countries above is the focus on new investment in manufacturing,” the report’s authors warned. “The lack of this in the UK means that developing effective global partnerships carries additional importance in building resilience across the UK semiconductor supply chain.”

CETaS urged the UK government to capitalise on a golden period in its relations with Korea following the UK-Korea Downing Street Accord signed in November 2023.

According to CETaS, there are significant complementarities between the two countries in the semiconductor sector, with UK strengths lying in the design stages of the supply chain and Korean strengths in the manufacturing stages. The report authors recommend the UK establishes a National Semiconductor Institute this year, as current structures are too diffuse and there is not a clear point of engagement for international partners wishing to work with the UK on semiconductors.

They note that building domestic fabs will not be sufficient to address national security concerns when 90% of the back-end work to make semiconductors ready for installation is still done in Asia.

The report notes that the UK’s strategic footholds are especially vulnerable to Chinese industrial policy. According to CETaS, China will compete directly with the UK’s emerging compound semiconductor industry. It already controls many of the critical minerals the UK relies on for that industry, such as gallium and germanium-based compounds, which are subject to export restrictions to safeguard Chinese national security and interests.

The report’s authors predict that China’s self-sufficiency drive will involve trying to design out foreign intellectual property (IP), including ARM, a part of the supply chain where the UK has a significant market share. “Chinese industrial policy is likely to lead to dumping of lagging-edge chips on the international market, inducing UK firms to buy more of them and increase reliance on an unreliable supplier,” the report stated.

CETaS said UK fabs do not produce the most advanced silicon semiconductors. The report’s authors note that lack of investment into building semiconductor facilities in recent decades has led to specialised clusters forming around certain universities, with each having its own manufacturing method and end product and manufacturing equipment less, which is unlikely to be cross-purpose. According to the CETaS, there may be a mismatch between the output from UK fabs and the requirements of UK manufacturing or technology firms which rely on semiconductors.

Looking at artificial intelligence (AI) hardware, while Nvidia dominates the graphics processing unit (GPU) market, Bristol-based Graphcore focuses on intelligent processing units (IPUs), which are designed to be better suited to the specific requirements of AI. In the report, CETaS warn that since IPUs are so different to the Nvidia GPUs familiar to users, gaining a foothold in the market would be “a tall order”.

The report’s authors also note that the UK government’s Exascale funding explicitly specified GPUs, excluding IPUs from the tender. “Forsaking technological diversity in the national AI compute infrastructure will further entrench applications that suit GPUs and limit techniques made possible by new AI systems,” they state.

CETaS also recommends that the UK government should be doing more to address the high costs of electronic design automation (EDA) tools, which restrict production timelines for new designs and smaller companies’ ability to scale up. These costs often result in companies outsourcing and missing out on commercial opportunities.

One promising solution that has been recommended in this regard is a government-sponsored Design Competence Centre offering design flow support, design services and EDA/IP training.