Event round-up: Semiconductor Scaleups Roundtable: Navigating Growth Challenges
On Wednesday the 25th of September, techUK hosted a roundtable discussion with major stakeholders within the Semiconductor sector to discuss the biggest challenges facing semiconductor scale-ups in the UK.
This event brought together leaders in the Semiconductor ecosystem, with expertise in scaleups, public and private investment, skills, academia and more. This is a continuation of techUK’s Semiconductor event series, with out next event being techUK’s flagship Tech and Innovation Summit (Nov 6th)
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Keynote Speaker: Sean Redmond, Managing Partner, SiliconCatalyst.UK
The session began with a presentation from Sean Redmond, Managing Partner from Silicon Catalyst.UK, an organization dedicated to supporting early-stage semiconductor companies.
The UK Semiconductor industry offers huge potential, with Semiconductors acting as the 3rd most profitable industry globally. The industry has managed to establish a successful churn of innovation and growth. Namely a cycle of more R&D leads to increased efficiency and innovation, leading to expanding use cases for Semiconductors, generating more revenue, all leading to more investment in R&D.
However, Sean highlighted that the new architectures are where he believes the next wave of opportunities lie.
Despite offering huge opportunities, many UK startups face significant challenges when it comes to attracting VC investment. While the UK boasts the second-largest VC base globally, trailing only the United States, there remains a considerable disparity in funding between the two countries. UK companies typically receive investment amounts that are only a fraction—roughly one-tenth—of what their American counterparts secure. This funding gap exists despite the UK being home to a thriving and well-established startup ecosystem, which includes innovative companies, a wealth of entrepreneurial talent, and supportive infrastructure. Consequently, British startups are often left competing for limited resources, potentially slowing their growth and limiting their ability to innovate compared to their U.S. counterparts.
To view Sean’s presentation material, please click here.
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Keynote Speaker: Nathalie Haller, Director of Banking and Investment of the UK Infrastructure Bank
Nathalie Haller, Director of Banking and Investment of the UK Infrastructure Bank discussed the work they’re doing to make the UK a fertile ground for scaling Semiconductor Companies.
Nathalie began by providing some context to UKIB’s work, with a £22bn fund available to UK scale ups. This fund requires UK businesses to address at least one of the two challenges: Tackling climate change or driving economic growth. The Semiconductor mandate is a part of this work, linking to their interest and investments into EV batteries, supply chains, and domestic manufacturing. One example of investment can be seen last year with Pragmatic, in which the UKIB provided £60m direct equity investment.
An observation made about scaling semiconductor businesses is that it is incredibly capital intensive. The UKIB can offer scaleups a minimum of £25m, generally at Series C and D, as a co-lead but recognize that UK semiconductor scale-ups find it challenging to secure lead investors. Nathalie mentioned that many investors have preconceived notions about software or hardware, preferring not to be patient for the often-long pay-off for hardware investments.
Investor readiness should be a focus if the Semiconductor industry is to be maximally supported, with appropriate due diligence so investors understand timelines and profitability.
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Roundtable: Navigating Growth Challenges
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Access to investment
The UK is estimated to have a £15bn gap in scaleup funding, with the capital intensive nature of Semiconductors being hit hard by this. Scaleups in the semiconductor industry struggle to find "qualified" investors who understand the sector's complexities, timelines, and capital needs. The UK also lacks sufficient investor interest in semiconductors, with some investors not fully appreciating the sector's potential. Lead investors, especially in growth stages, are crucial, but many UK-backed funds need a private lead investor, often sourced outside the UK. VC's in the UK have a low-risk appetite and hesitate to invest in infrastructure.
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Need for Long-Term Thinking
The UK must think more long-term in it’s approach to being globally competitive with clear visions and long-term capital. Quantum was cited as an example in the UK of a sector being successfully fostered, with clear vision, backed by long-term funding. This has led to the UK being a global Quantum leader, these support methods could be applied to Semiconductors, especially in the areas we have strengths.
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Fragmentation and Visibility
The UK would benefit from more industry alignment and cooperation, in order to optimize allocation of resources geographically and across organizations. The Semiconductor industry may benefit from rising to a clear mission, outlining what the vision is and what the strategy is to get there. Those who work in Semiconductor Design and those who work in Manufacturing are often working parallel to each other. There must be recognition that these different companies face different challenges, brining them together when possible but offering tailored support. For scaleups, who may already be pressed for resources, identifying clear routes to investment is difficult.
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International investment
The UK is viewed by some as not attractive for Semiconductor investment, however it has a few undeniable strengths; namely Compound Semiconductors and it’s University research. The UK’s strong heritage in power Compound Semiconductors and the current domestic activity and opportunities in this field, suggests the UK can compete and excel with a scaled-up domestic industry. However, a stronger early test bed for domestic manufacturing is needed, which if available would support commercialization through effective and efficient testing of new products.
One organization mentioned that only 5% of their total funding originates from the UK, there are large pressures to expand or relocate to other countries if they are to scale effectively. Joint Initiatives with other countries to support R&D has been a positive sign, however they are too small in quantity, with one attendee citing an available fund of £500k, where a scale of millions would have been required.
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Next steps and opportunities
With a New Government, Industry should collaborate to emphasize the key role Semiconductors can play in supporting growth and increased productivity. The UK’s strengths make it well placed to lead in Compound Semiconductors like Silicone-Carbide for Net Zero, IP and Photonics.
The Government should commit to establishing the National Semiconductor Institue would be well placed to address some of these issues. The Institue could act as a central voice, driving an ambitious vision, with three or so key missions for the UK to strive for.
Where next?
techUK is incredibly grateful to all our attendees for making this session deeply valuable to our ongoing work. As a leading voice for the UK Semiconductor industry, techUK will be using the learnings and insights from our session to inform our upcoming Semiconductor Policy Paper. If you are interested in discussing this paper, please reach out to [email protected]
We’re keeping the Semiconductor conversation going in our Tech and Innovation Summit 2024. This year's 2024 summit will explore the latest advancements in exciting technologies transforming the UK economy and show attendees how they are being applied across different industries and sectors to make their promise a reality. Register to our event below.
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