Britain’s government aims to build up the country’s chip industry, mitigate the risk of supply-chain disruption and bolster national security. Yet it cannot hope to match the spending power of supersized economies like America’s and China’s
Industrial policy is back in vogue, especially when it comes to microchips, which power everything from washing machines to missiles. Spooked by shortages during the covid-19 pandemic, and worried that so much of the industry’s capacity is in Taiwan, which China regards as a rogue province, governments have been waving some very big chequebooks.
Britain’s announcement looks anaemic by comparison. The opposition Labour party accused the government of lacking ambition, and also pointed out that the money is backloaded, with just £200m due to be spent by 2025 and the rest doled out by 2033. Simon Thomas, the boss of Paragraf, a chip firm based in Cambridge, pointed out that even the full £1bn would not be enough to fund the cost of a single modern chip factory or “fab”.
Another aim is to position the country to benefit from technologies that might become big in the future. Ministers are keen, for instance, to promote compound semiconductors. These make use of elements other than silicon, such as germanium or selenium, which have different electrical properties. The strategy also mentions photonics, which uses light rather than electricity to do computational work. Britain has small firms active in both areas.
Some commentators think the government’s understated approach has merit. Malcolm Penn, who runs Future Horizons, a chip-industry consultancy, points out that the worldwide wave of subsidies to the industry now amounts to around $50bn a year, or nearly half the industry’s capital expenditure. That wall of money, he says, risks creating a long-term glut in capacity that could eventually leave state-backed factories struggling.
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