Is the UK falling behind in the semiconductor arms race?

Our society is built on semiconductors. As fundamental parts of integrated circuits, or microchips, these tiny devices are at the heart of almost all modern electrical devices. Semiconductors are also essential components of future technologies, such as artificial intelligence, quantum, and 6G, and are vital to the UK’s Net-Zero transition.

It’s no surprise then that the semiconductor industry is booming, with a market value estimated to reach $1 trillion by 2030. In May 2023, the UK government announced a new 20-year plan to boost the domestic semiconductor industry. But is this enough to secure the UK’s position in the semiconductor pecking order?

What are semiconductors?

A semiconductor is any substance that has electrical properties sitting between those of a conductor and an insulator. There are two main types: intrinsic and extrinsic.

Intrinsic semiconductors are pure inorganic compounds, such as silicon, geranium or molybdenum disulfide (MoS2). Extrinsic semiconductors, on the other hand, have impurities which make them more conductive at room temperatures.

How do semiconductors work?

In all atoms, electrons are arranged in layers of varying energy levels. Under normal circumstances, electrons remain in the lowest energy level possible, called the ground state. If they are given enough energy, electrons can jump to a higher energy level, and enter an excited state.

In semiconductors, there is a gap between an excited and ground state, called the band gap. Electrons are able to jump from the filled (valence) bands to the empty (conduction) bands when energised. Once in the conduction bands, the electrons can move freely within the material, allowing the flow of current.

This is important, as it could be described as a natural on/off switch. If there is not enough energy to jump the gap, the conduction is off and the electrical current will not flow, but with enough energy through the circuit, electrons are free to move and the material will conduct electricity.

Through this mechanism, semiconductors control and manage the flow of electrons in the many electrical devices we use every day.

Semiconductor supply chains

Taiwan is the world’s largest manufacturer of semiconductors, with the UK, the US, Europe and China relying on Taiwan to supply semiconductor devices. In fact, Taiwan provides over half of the global supply of semiconductors, and accounted for almost 90% of the industry for advanced microchips in 2020.

Concerns regarding this precarious global supply chain first arose during the pandemic. Disruptions to manufacturing and transportation processes, alongside a surge in demand, led to a global shortage of semiconductors.

Prior to this, the blockage of the Suez Canal in March 2021 created a bottleneck in the east-to-west electronics supply chain. This had long-lasting effects on the industry and led to rapid inflation of processing chips.

This bottleneck in the supply chain caused major economic blows to consumers and companies alike. For example, Apple, the world’s biggest buyer of semiconductors spending $58 billion annually, was forced to delay the launch of the iPhone 12 by two months due to the shortage of semiconductors.

The semiconductor arms race

With rising geopolitical tensions between China and the US over technological dominance, and increasing concerns of a potential invasion of Taiwan by China, many fear potential supply disruption that would have widespread effects on global economic security and the energy transition to net-zero.

In response, many countries have began to invest in their domestic semiconductor industries, resulting in a ‘semiconductor arms race’. The US’s CHIPS and Science Act announced in 2022 pledges $52 billion in subsidies for semiconductor manufacturing and research, and induced a further $200 billion of funding from private investors. The US has also imposed tighter export controls on semiconductor equipment sent to China. The EU announced a similar plan to boost their semiconductor capabilities, with €43 billion of investment announced in 2022.

The UK’s National Semiconductor Strategy

The UK announced their own investment package in May 2023, pledging £1 billion over the next 20 years to secure the UK’s role in design, research and manufacture of semiconductors. While the government clearly recognises the need to grow the domestic semiconductor industry, protect supply chains against disruption, and safeguard fundamental new technologies, some are calling the governments plan “lacking”, and “frankly flaccid”.

The government’s strategy aims to make the UK a valued part of the global supply chain by focusing on design of next-generation technology as well as skills and technical expertise. The strategy also seeks to form agreements with countries such as the US, Japan, and South Korea to reduce threats to the semiconductor supply chain.

Where do we go now?

Only time will tell if the UK’s plan to boost its semiconductor industry is a success or failure. Considering the potential impacts of a shortage of chips on the UK’s economy and society, it is sure to remain an important issue for the government.