The UK has grand ambitions to establish itself as a key player in the global semiconductor industry. But despite a clear vision, the path forward is strewn with challenges ranging from funding shortfalls to talent shortages and global competition. With the semiconductor market expected to hit a staggering $1 trillion by 2030, the stakes couldn’t be higher, notes a recent report published by TechUK.
Semiconductors are the backbone of modern technology, powering everything from smartphones to satellites. Yet, according to a new report from techUK, British chip companies, especially startups and scale-ups, face significant hurdles in securing adequate investment.
“There’s a clear shortage of UK-based investors with the expertise needed to understand the complexities and timelines of semiconductor development,” said Richard Price, CTO of Pragmatic. This lack of investor awareness hampers early-stage companies seeking to scale, despite the industry’s huge growth potential.
While the UK government has committed up to £1 billion over the next decade, this pales compared to global rivals. The European Union’s Chips Act, for instance, boasts a €43 billion investment, while the United States, China, and South Korea are also funneling billions into domestic chip manufacturing. Without competitive funding, the UK risks being left behind.
The global semiconductor shortage in 2020, which shaved an estimated 1% off global GDP, proved how vulnerable supply chains can be. For the UK, ensuring a resilient supply chain is more than an economic issue—it’s a matter of national security. Disruptions can halt production in critical sectors like healthcare and defense, reads the report.
Skills shortage: An overlooked challenge
Another hurdle is the talent gap. The UK semiconductor industry relies heavily on international talent, particularly for design and intellectual property (IP) roles. However, there aren’t enough local graduates with the necessary skills in electronic engineering.
Lower visa costs and faster processing times could help attract global talent, but techUK stresses the importance of homegrown expertise. “Without a robust pipeline of skilled workers, we can’t sustain long-term growth,” the report warns.
While the UK excels in design and IP—with two-thirds of its semiconductor companies focused on these areas—it lags in large-scale manufacturing. Countries like Taiwan and South Korea dominate this space, thanks to heavy government incentives and advanced fabrication facilities.
Building local “fabs” (fabrication plants) would not only boost production but also enhance the UK’s technological sovereignty. Yet, such infrastructure requires significant capital and time.
Launched in 2023 as part of the National Semiconductor Strategy, the ChipStart pilot programme provided £1.3 million in public funding. Impressively, this small investment helped participating startups secure nearly £20 million from private investors and grants.
techUK is now urging the government to expand ChipStart into a permanent initiative. “The early results speak volumes,” said a spokesperson. “With sustained support, we can unlock the full potential of our semiconductor scale-ups.”
To address these challenges, techUK’s report outlines several recommendations:
Establish a National Semiconductor Centre: A central hub to represent and coordinate the sector.
Create a Design Competence Centre: To facilitate R&D and promote knowledge sharing.
Extend R&D Tax Relief: Especially for capital expenditures to incentivize investment.
Develop Pilot Lines: To streamline the commercialization of new products.
Foster International Partnerships: To secure vital investment and research collaborations.
Semiconductors are integral to the UK’s economic growth, technological leadership, and national security.
Companies like Arm, Britain’s most valuable tech firm with a market cap exceeding £130 billion, highlight the sector’s potential.
The message is clear: the UK has the vision but now needs the execution.
