The Royal Academy of Engineering recently published a new report State of º£½ÇÊÓƵ Deep Tech 2024, which provides a comprehensive analysis of the º£½ÇÊÓƵ’s deep tech ecosystem. It also highlights investment trends, challenges, and opportunities in businesses leveraging scientific and engineering breakthroughs to solve complex global challenges.
One of the standout findings of the report is the immense potential within the Compound Semiconductor Cluster in Cardiff, which has emerged as a key driver of the º£½ÇÊÓƵ’s deep tech ecosystem and is positioning Wales as a global leader in next-generation semiconductor technology.
As part of the broader º£½ÇÊÓƵ deep tech landscape, the Cardiff cluster plays a crucial role in developing cutting-edge semiconductor solutions that power advancements in critical industries such as telecommunications, healthcare, energy, and automotive technology.
Despite these promising developments, the report reveals a significant under utilisation of the cluster’s potential. Wales accounted for just 1.9% of all º£½ÇÊÓƵ deep tech deals over the last ten years, despite £5 billion being invested annually in deep tech ventures. This represents only ten investments, a figure that is strikingly low given the hundreds of millions of pounds in public funding that has been allocated to support the entrepreneurial potential of this cluster.
Part of the blame must be placed firmly at the door of the Cardiff Capital Region (CCR), which has not been slow in claiming credit for the development of the cluster in recent years after its £38m investment, alongside IQE, in a compound semiconductor foundry.
During the Covid-19 pandemic, I was asked by the senior team at CCR to put together a strategy for an innovation fund that would encompass all stages of business development, from ideas to scale-up, with an emphasis on boosting funding for start-ups in key clusters such as compound semiconductors.
Despite the obvious need for a strategy that reflected the life cycle of innovative start-up and scale-up firms, it was rejected and instead they decided to develop an investment fund that focused on low-risk investments in established businesses that should be able to raise such funds elsewhere without public intervention.
The timidity of this inexplicable decision was disappointing, even more so now, as the report highlights the ground lost to the rest of the º£½ÇÊÓƵ in the development of deep tech and spin-off opportunities from the compound semiconductor cluster.
However, it is not too late to build on the legacy of the Compound Semiconductor Applications Catapult, SPTS Technologies, IQE, Newport Wafer Fab (now owned by US firm Vishay Intertechnology), and the academic expertise at Cardiff University and Swansea University to achieve something truly world-class in developing deep-tech ventures.
One way to maximise the potential of the Cardiff cluster is by establishing a dedicated deep tech incubator supported by an investment fund, which could serve as a catalyst for innovation by providing start-ups with the critical resources needed to transform groundbreaking research into viable businesses.
A deep tech incubator could offer state-of-the-art facilities, mentorship, and access to a network of investors and industry partners, enabling startups to navigate the complex pathways from research to commercialisation.
Furthermore, the creation of a Deep Tech Research Centre within the cluster could drive world-leading R&D in compound semiconductors, focusing on cutting-edge applications such as AI-driven chip design, quantum computing, and advanced photonics. This centre could facilitate collaboration between academia and industry, ensuring that groundbreaking research translates into commercial applications that can drive economic growth and job creation in Wales.
While the º£½ÇÊÓƵ Government has highlighted deep tech as a priority sector in its Industrial Strategy, more targeted support is needed to capitalise on Cardiff’s existing competitive advantage. For example, the shortage of lab and office space in key locations such as the ‘Golden Triangle’ (London, Cambridge, and Oxford) presents an opportunity for Cardiff to attract deep tech entrepreneurs looking for cost-effective alternatives.
The recent report also underscores the importance of public and private sector collaboration to drive innovation. Initiatives such as the AI Opportunities Action Plan and the Regulatory Innovation Office are expected to play a significant role in supporting deep tech businesses. However, regional bodies like CCR must align their strategies with national priorities and focus on nurturing high-growth start-ups rather than opting for low-risk, low-impact investments.
The potential economic impact of getting this right is enormous as deep tech companies generate high-value jobs and can contribute significantly to GDP. Rather than investing in speculative land deals and investments in businesses which could have been supported by existing funders, it is time for public bodies tasked with economic regeneration to focus on the real future opportunities for the Welsh economy.
The world-class competitive advantage that Wales already possesses in compound semiconductors should not be squandered and efforts should be directed toward establishing Cardiff as a global leader in deep tech innovation, ensuring that the region can fully capitalise on the opportunities presented by this transformative sector.
The State of º£½ÇÊÓƵ Deep Tech 2024 report should therefore serve as a wake-up call for policymakers and investors in Wales. The foundations for success are already in place, with leading industry players, world-class research institutions, and strong government backing.
However, it is now crucial to take bold steps to unlock the full potential of the Cardiff semiconductor cluster and establishing a dedicated deep tech incubator, a targeted investment fund, and a cutting-edge research centre would be transformative steps that could ensure Wales’ position as a leader in the emerging deep tech landscape.
