LONDON — Britain’s semiconductor industry needs financial support from the government, with insiders warning that the country risks losing its microchip firms to the US and other countries if it does not act soon.

Prime Minister Rishi Sunak’s government has yet to announce a strategy outlining Britain’s efforts to support the chip industry. And the country’s semiconductor leaders are growing frustrated.

Pragmatic Semiconductor, a Cambridge start-up that makes non-silicon chips, has warned it may be forced to move overseas if the government does not soon publish a plan for the industry.

“It must make economic sense for companies like ours to continue operating and manufacturing here, and when there are greater potential economic benefits and government support packages overseas, then relocating is the only sound business decision,” said Scott White, CEO director of Pragmatic Semiconductor. , told CNBC.

The UK is an underrated player in the global chip market, specializing in the design, intellectual property, research and manufacturing of sophisticated semiconductors.

It is also home to one of the most coveted semiconductor assets in the form of chip designer Arm. Arm’s licensed chips, based in Cambridge, England, are used in about 95% of the world’s smartphones.

Semiconductors and the mainly East Asian supply chain behind them have become a tough issue for world governments after a global shortage led to supply problems for major automakers and electronics makers.

The Covid-19 pandemic has revealed an over-reliance on semiconductor component manufacturers from Taiwan and China. This dependence has become a source of rich tension between China and Taiwan.

TSMC, the Taiwanese semiconductor giant, is by far the largest microchip maker. Its chip-making prowess is the envy of many developed Western countries, which are taking steps to increase domestic chip production.

IQa microchip firm in a semiconductor “cluster” in Newport, Wales, has also warned it could be forced to move to the US or EU if the government does not act in the next six months.

“We would like to stay in the UK and have committed to growing in the UK… but we also have to do what the shareholders want and go where the money is,” America Lemos, chief executive of IQE, told The Times.

A UK government spokesman was not immediately available for comment when contacted by CNBC.

In the US, President Joe Biden signed into law the CHIPS and Science Act, a $280 billion package that includes $52 billion to boost domestic semiconductor manufacturing.

Meanwhile, the EU has committed 43 billion euros ($45.9 billion) to Europe’s semiconductor industry, aiming to produce 20% of the world’s semiconductors by 2030.

China has also been forced to rethink its chip strategy after facing tough trade sanctions from the US. In December, the country was said to be preparing more than 1 trillion yuan ($147 billion) for the chip industry, Reuters reported.

“Act of People’s Self-Mutilation”

Britain’s tech industry chiefs said the government’s lack of a similar strategy was harming the country’s competitiveness.

They say Britain is unlikely to have the financial strength to match this bold spending package. Still, they hope the country will commit to multimillion-dollar investments, tax breaks and easier immigration for high-skilled workers.

“Chasing to catch up is not even remotely within the UK’s ability,” Simon Thomas, CEO of Paragraf, a British firm that designs and manufactures graphene-based electronics, told CNBC.

Lawmakers on the Business, Energy and Industrial Strategy (BEIS) Committee called on the government to take action on the semiconductor industry on February 3, calling the lack of a coherent microchip strategy “an act of national self-harm”.

Government agency BEIS was disbanded on Tuesday and replaced under Prime Minister Risha Sunak’s reshuffle.

The business and industrial strategy portfolio is now held by Kemi Badenach, minister at the newly created Department of Business and Trade, while the Department of Science, Innovation and Technology is headed by Michelle Donelan.

Sunak became Britain’s third prime minister last year, inheriting a bleak economic background from his predecessor Liz Truss.

He is being pressured by chip bosses to outline the industry’s strategy — and fast.

Russ Shaw, founder of London Tech Advocates, said the government needed to “step up”. London was “too distracted by the chaos”.

The British Semiconductor Strategy was expected to come out last year. But it faced a number of delays due to political instability. The government previously proposed the creation of a national agency, among other initiatives, to develop the semiconductor industry.

“The rumors I heard [it may arrive] any day,” Chris Ballance, co-founder of British quantum computing startup Oxford Ionics, told CNBC. However, he added that the process “has been going on for the last four or five months.”

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