The º£½ÇÊÓƵ Government’s industrial strategy (which will be finalised next spring) focuses on eight growth driving sectors from advanced manufacturing to financial services.
But there is one technology that underpins them all and is the foundation for economic growth. And most of our competitors (and enemies) have realised that successful states need advanced semiconductors.
China saw the nexus between hardware and hard power years ago. The US seeks to hold their pre-eminence with billions of subsidies, at least for the period while Joe Biden remains in the White House. EU states subsidise around a third of capital costs.
Wales (and the rest of the º£½ÇÊÓƵ) has world class R&D in our universities, and a skilled workforce, but consistently fails to scale up technology companies.
Chip making is the most complex manufacturing process on earth, producing a product that can be sent in the post. This makes the sector uniquely vulnerable to geopolitical tensions.
Some 90% of advanced semiconductors are manufactured in Taiwan, most of those by one company. Those supply chains ground to a halt during the pandemic affecting everything from cars to laptops. President Xi Jinping has said that the ‘reunification’ of Taiwan and China is ‘inevitable’, so onshoring º£½ÇÊÓƵ chip supplies should be a first order priority.
This is what Chris Miller calls ‘the fight for the world’s most critical technology’. It is critical for our national security. It’s no wonder the government purchased a chip factory in North-East to secure supplies for our defence industry.
The previous government’s semiconductor strategy was pure R&D. There was no support for manufacturing despite the º£½ÇÊÓƵ having the world’s first compound semiconductor cluster in Newport, making advanced chips that enable facial recognition in iPhones.
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It’s like spending our capital training up the best football players and then selling them off cheap in Germany and Italy when they go professional and can make a return.
The Science Secretary Peter Kyle has committed to putting AI at the heart of the government’s growth agenda. But with venture capital investment in the semiconductor sector having fallen from 8% to just 1%, we need secure foundations.
Compound semiconductors, with speeds 1,000 times those of traditional chips, provide the computing power necessary for AI algorithms to handle large volumes of data.
There’s no net zero without compound semiconductors. For instance, upgrading the world’s data centres from silicon to gallium nitride would reduce energy losses by 30 to 40%, the equivalent of saving over 125 million tons of CO2 emissions. With a lower carbon footprint and more efficient power conversion, they will allow the shift to electrification without overloading the grid.
Imagine the change we could make. With Welsh chips in wind turbines, made with steel in the furnaces of South Wales? Instead of simply relying on China to make the tech that drives our future.
After the º£½ÇÊÓƵ Government removed its previous Chinese owners, a deal between the US company Vishay and the Welsh Government means a new £51m investment in the Newport Wafer Fab, Britain’s biggest chip maker – that’s good news for Wales, but also our struggling car industry in West Midlands.
An Oxford Economics report showed every semiconductor job supports six jobs in the wider economy, while wages and GVA are twice the national average, and the economic clusters are all outside London and the south-east.
The previous government pledged to invest £1bn in the sector, but didn’t identify where the money would come from (sound familiar?). The Government has a chance in its spending review to reduce our dependence on foreign suppliers and create new skilled jobs.
- Drew Nelson OBE is chair of the advisory board of the all-party parliamentary group on semiconductors. He is also founded and is a former chief executive of Cardiff-based compound semiconductor firm IQE.
