Why niche ideas aren’t half measures in the semiconductor race
Sometimes, seemingly small innovations transform into global powerhouses.
In tech, Apple is held up as the shining example of moving from humble beginnings to market domination.
Niche, it seems, doesn’t always mean narrow.
Now, there’s an opportunity for UK semiconductor businesses to carve out a niche of their own. When the government announced a £1bn strategy for the country’s electronics sector in May 2023, it promised to “unlock the potential of British chip firms in key areas”. Ministers also pledged to provide updates on additional support for semiconductor manufacturing before the end of the year.
While this funding is not sufficient to make the UK a global semiconductor powerhouse on its own, it could play a crucial role in bolstering the country’s capabilities as a niche player in a vast, complex, and globalised sector.
As long as this capital is applied effectively, that’s potentially great news for start-ups and scale-ups in specific parts of the semiconductor supply chain.
How niche businesses can flourish
Both individual companies and countries as a whole can find success through specialisation. As the UK seeks a seat at technology’s top table among a co-operative group of nations, there’s an opportunity to find a niche that businesses in other countries need. It could be a focus on intellectual property, the fabless production of a class of chips or simply building greater capacity or intelligence into existing systems.
Whichever niche the UK supply chain decides to develop, businesses only need to look a short distance to the east to find a beacon of success in the sector.
Headquartered in Veldhoven, Netherlands, ASML is a photolithography specialist. The technology it manufactures underpins the process whereby shapes and patterns can be printed onto semiconductors, essentially ensuring the products that use them work as expected.
Even though it’s relatively small in scale, ASML has become a vital player in the global semiconductor ecosystem and a crucial cog of industry more broadly in the Netherlands. In February 2023, the company’s market capitalisation was $250bn: a quarter of the entire country’s GDP.
It has blossomed because no other company – or country – can provide the same service to the worldwide semiconductor market. ASML found its niche.
So as the UK seeks to take the lead on the industrialisation of Artificial Intelligence (AI) in general, and a greater slice of the exponentially growing semiconductor market more specifically, how can it learn from ASML’s example?
Why the chips aren’t down for the intelligent IoT
You may already be aware that the intelligent IoT combines AI technology with the infrastructure of the Internet of Things.
In that environment, it’s the job of AI to make the IoT as efficient as possible, not least by improving interactions between humans and machines.
What you might not be aware of is the exponential rate of growth and revenue potential. Recent predictions put its value at north of $144bn by 2028. No wonder the UK wants a slice of the pie. And it’s right to investigate this innovation.
The devices which make up the intelligent IoT offer a valuable market for chips. This has the dual benefit of delivering independent intelligence and inter-device communication to the global supply chain. Crucially, this can be done at a cost-effective price point.
Such chips have the potential to fast become the de facto component to power access surfaces. They could even become an actuator for ChatGPT and other Generative AI platforms that seem to be developing faster than humans can keep up with.
The semiconductors of connected devices might turbocharge the design of smart speakers, enabling them to interpret and respond to voice control. Alternatively, the development of advanced recognition functionalities in devices that rely on both sound and vision, such as smart security cameras.
While the potential possibilities are endless, the question is whether the next ASML could be UK-based.
Becoming a semiconductor superpower
Dominating a niche market requires capital, talent, and patience.
Government investment must drive growth across the semiconductor value-chain – from start-ups to scale-ups. Successful commercial ventures, built with patience and care, will provide the firm foundations of a self-sustaining sector in the long term with appropriate support.
All of this will require the best talent to fire up technology businesses. Measures are needed to attract leading job candidates, meaning anything from curated internship programmes to talent-driven visas. US think tanks have already recommended visas for chip development – and UK plc looks set to follow suit. This can only be a positive – if we want to play in the big leagues, we have to be prepared to keep up with the most significant players.
While success on the scale of firms like ASML is ambitious, businesses can build on certain principles in pursuit of independent success, on their own terms. There’s no reason why the UK can’t then grow multiple companies into worldwide leaders. In a global tech community, where all nations rely on a supply chain that stretches beyond their own shores, niche might just be the smart way to go.
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Today, Rory leads techUK's emerging technologies activity across everything from immersive, web3, AI and robotics to space, gaming & metaverse.
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