Industry views
14 May 2024
by Dr Nicky Athanassopoulou

Building a competitive and sustainable semiconductor sector in the UK: challenges and opportunities

Guest blog from Dr Nicky Athanassopoulou at IfM Engage, Institute for Manufacturing, University of Cambridge as part of our #UnleashInnovation campaign week 2024.

Semiconductor technology is essential to modern life as it forms the foundation of many products and applications, ranging from aviation and healthcare to telecommunications and defense. Advancements in this technology are critical for unlocking future innovations across sectors such as AI, quantum computing, and developing 6G networks. 

The semiconductor sector will play a crucial role in driving progress in these areas and enabling the UK government to meet its commitments in areas such as net zero, ensuring robust UK cybersecurity, and fostering leadership in artificial intelligence. 

What are the UK's strengths and expertise, and how can we build on these to create a thriving and sustainable sector that can compete on a global scale? 

The global semiconductor market and the UK's role 

The semiconductor market is a very large industry, which was valued at approximately US$574 billion in 2022. Annually, over 1.1 trillion semiconductors are manufactured worldwide, mainly in East Asia, and distributed across a complex and dispersed supply chain. Consumer electronic devices are expected to drive the growth of the market at a rate of 6% to 8% every year until 2030 (SIA 2023 Factbook)  

The UK has a small percentage of the global market (1% - 1.5%). A large percentage of UK firms (95%) are small, having less than 250 employees. Most UK semiconductor firms (approximately 66.6% ) are fabless companie (Data provided by the Silicon Catalyst.) The UK’s semiconductor industry is relatively small compared to the US, the EU, and other Asian countries. Furthermore, the UK does not have an end-to-end supply chain in semiconductors, making it particularly fragile to supply chain disruptions.  

However, despite its small overall size, the UK semiconductor sector has significant academic and industrial know-how in complementary metal oxide semiconductor (CMOS) post-processing and innovative chip architectures. The industry has strong capabilities in various packaging technologies, including radio frequency and power, and a wealth of knowledge in advanced heterogeneous 2.5D/3D packaging technologies. The UK is also skilled in compound semiconductor materials, processes, chip design, and intellectual property across various applications. 

Key challenges 

It's crucial to address the key challenges that hinder the UK's ability to build a competitive semiconductor industry. These challenges include: 

  1. Skills shortages - the UK faces a critical skills gap and retention issues due to a shortage of skilled workers in the semiconductor sector. The sector requires a diverse range of specialist skills, but unfortunately, some of these skills are in extremely short supply in the UK. This shortage limits the ability of organisations, especially smaller companies, to innovate and scale up. Furthermore, comparatively lower salaries and high cost of living in the UK make it less attractive to international talent, further exacerbating the problem. 

  1. Lack of adequate allocation of resources and investment to scale up - there is currently a mis-balance between capital for scaling-up and R&D investment in the UK to support next-generation compound semiconductor and packaging developments with most of the investment allocated to R&D. The risk is that without scaling-up support, users will be driven overseas for production and (increasingly) for design in order to achieve a smooth transfer to manufacture. 

  1. Inadequate facilities - the UK semiconductor industry lacks adequate facilities for silicon processing. To scale up, collaboration with high-volume production foundries abroad is necessary. This requires the use of compatible processes and materials. The lack of commonality between prototyping facilities and volume manufacturing leads to complexity, cost, and time issues. Additionally, accessing academic or commercial facilities is difficult due to low visibility of existing infrastructure in the UK. 

  1. Lack of supply of certain critical semiconductor materials -  there is a lack of reliability and security in the supply of basic materials used for packaging. As a result, there is no source for silicon carbide (SiC) substrates in the UK, and there are currently US export control restrictions for the same material. This leads to long lead times for material delivery and variations in quality. 

Opportunities for growth 

Despite these complex challenges, there is much to be optimistic about. The UK has some of the finest semiconductor companies in the world. And, although the UK accounts for a very small percentage of sales of semiconductors across the world, its products have global reach (over 90% of silicon semiconductors created in the UK are exported).  (The semiconductor industry in the UK, HC 291, 28 Nov 2022.)

Furthermore, the UK has strong capabilities in IP and chip design, compound semiconductors, and R&D. It also has world-class universities and research activities on different materials and technologies, e.g., silicon and compound processes, advanced packaging processes, and novel chip architectures.  

In 2023, the Department for Science, Innovation and Technology (DSIT) commissioned the IfM Engage Consortium to undertake a study into infrastructure for growing the UK semiconductor industry, which is now being used by the Department to inform how it supports the sector by capitalising on these key strengths. The Consortium consisted of Cambridge Econometrics, CSA Catapult, Future Horizons, IfM Engage, Academics from Imperial College, The Photonics Leadership Group, Silicon Catalyst, Semiwise, Techworks, University of Leeds.

It will also be important to consider how the UK can support the emerging field of silicon photonics R&D. This will increase the likelihood of the UK developing niche specialities and core capabilities in photonics technologies and applications. These technologies and applications are expected to be crucial in the fields of AI, communication, and autonomous vehicles. 

Furthermore, given the interdependence of different organisations and actors in the sector, and the funding required to remain competitive, national coordination between industry, academia, and government is necessary. This coordination will ensure that the UK invests wisely and effectively addresses the current barriers. It will also ensure that there is sufficient support for skills development and retention. Scale-up funding for the industry will be essential to facilitate growth and develop necessary skills. 

IfM Engage is an embedded knowledge transfer company within the Institute for Manufacturing (IfM), University of Cambridge. IfM Engage combines research excellence and industry expertise to conduct bespoke strategic consultancy, talent and leadership development and company membership programmes.  

Find out more about IfM Engage and the UK Semiconductor Infrastructure Initiative study here: https://engage.ifm.eng.cam.ac.uk/uk-semiconductor-infrastructure-initiative-2023/  

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Authors

Dr Nicky Athanassopoulou

Dr Nicky Athanassopoulou

Head of Solution Development, IfM Engage, Institute for Manufacturing, University of Cambridge.

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