Rishi Sunak will announce a ‘semiconductor partnership’ with the Japanese government during a visit to Tokyo on Thursday, as the UK looks to reduce geopolitical risk by diversifying its chip supply chain.

The UK prime minister’s announcement comes ahead of the publication on Friday of a British semiconductor strategy, which will outline the dangers to the UK chip industry of being overly reliant on a handful of supplier countries, including Taiwan.

Sunak will say on Thursday that his semiconductor partnership with Japan will include “ambitious R&D cooperation and skills sharing,” strengthening each country’s domestic sectors and bolstering supply chain resilience.

The deal will form part of a broader “Hiroshima Agreement” between the UK and Japan, which involves closer economic, security, energy and technological cooperation. It will be revealed when Sunak visits a naval base in Tokyo ahead of the G7 summit in Hiroshima.

The partnership comes as the government will finally reveal its plan to develop Britain’s chip sector on Friday. This will count on £1bn of medium-term government spending on chips that underpin all modern technologies, from smartphones to cars, according to two people briefed on its contents.

However, the amount promised by the government is small compared to Washington’s “Chip Act”, which entails $52 billion in subsidies and incentives to encourage semiconductor companies to build manufacturing plants in the US. The EU has also launched its own “European Chip Law” with 43,000 million euros of state aid.

Scott White, co-founder of Britain’s Pragmatic Semiconductor group, which is developing small, low-cost plants for its ultra-thin chips, said £1 billion seems to be the “right level” for a country with a smaller economy and industrial base. than the United States or Germany. But he added that it has to be “distributed in a relatively small period of time to be really useful.”

“We can be comfortably profitable without incentives, but if everyone offers them elsewhere, that makes the cost of production higher here,” said White, who previously said he would consider a public listing in the US if the government it doesn’t do enough to make Britain a financially attractive place to grow the business.

The UK’s semiconductor strategy will emphasize the need for Britain to reduce its reliance on semiconductor imports from geopolitically sensitive parts of the world, such as Taiwan, the world’s largest chipmaker, which has long been under threat from its largest neighbor, China.

It will address the need to diversify supply chains by working more closely with other international counterparts such as Japan, according to officials familiar with its content.

The British government launched its review after the Covid-19 pandemic exposed the fragility of the global semiconductor supply chain, leading to a global shortage. The government intended to publish the plan by fall 2022.

Last year the government blocked acquisition of Newport Wafer FabBritain’s largest semiconductor plant, by Nexperia, a Chinese-owned company, in a sign of growing sentiment.

The review is expected to say that the UK cannot and should not meet all of its semiconductor needs domestically and should focus its efforts on value-added areas such as research and design, compound semiconductors and “advanced packaging”, whereby several chips are combined into one product

Although the UK has a marginal role in chip manufacturing, it is home to two of the world’s leading chip design firms, Arm and Imagination Technologies, which account for around 40 per cent of global IP development in the sector.

It is also home to companies developing compound semiconductors, which are made from materials other than silicon and are a promising new area of ​​research.

Additional reporting by Kana Inagaki

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