The UK government will offer chip companies up to £1bn over the next decade with the aim of boosting Britain’s resilience in a sector that has suffered severe supply chain disruptions and faces the specter of a worsening geopolitical tensions.

British chip companies will be offered £200m between 2023 and 2025, with the remaining £800m to be scrutinized by the end of 2033, according to the government’s National Semiconductor Strategy, which was published on Friday after a two year wait.

The amount promised by the government is dwarfed by Washington’s Chip Act, which involves $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 Token Law” with 43,000 million euros of state aid.

UK officials say the sums involved were proportional because the British government does not believe the investment required to build factories in the UK, which can cost up to $10bn, is justified by returns.

Instead, the UK plans to focus its resources on areas where British companies have a “strategic advantage”, such as compound semiconductors that are made from multiple novel materials, while also establishing alliances with manufacturing hubs such as Japan.

Amelia Armour, a partner at Amadeus Capital Partners, a UK venture capital firm that invests in chip startups, said the government’s ambitions were “lacking”.

“The level of investment announced for the next two-year period is disappointing, especially when you consider that the UK must try to keep pace with the levels of investment announced as part of the EU and US chip laws. USA,” he said. “£200m spread across many initiatives will not achieve much and will need to be allocated in a very specific way to have an impact.”

The strategy marks the first time the UK government has launched a major support program for the semiconductor sector since the 1980s, both a sign of the growing importance of chips to the global economy and an admission that the industry Britain has struggled to keep pace with the rise of high-tech manufacturing in Asia for the past four decades.

“Our new strategy focuses our efforts where our strengths lie, in areas like research and design, so that we can develop our competitive advantage on the global stage,” Prime Minister Rishi Sunak said.

The launch comes as top UK chip design firm Cambridge-based Arm plans to go public in the US later this year after its parent company SoftBank scrapped a listing. in London.

Rene Haas, Arm’s chief executive, said: “The UK is a major hub of innovation and talent for both Arm and the broader industry and we look forward to working with government and other partners to help make this [strategy] a reality.”

Nigel Toon, chief executive of Graphcore, the AI ​​chip designer that is one of the UK’s most valuable start-ups, welcomed the “recognition of the very valuable contribution the sector makes to our national economy.”

However, he added: “Obviously, the overall level of investment and the time frames in which this investment will be implemented are at a modest level compared to the much larger investments that are being made in other countries, including direct competitors such as Germany, South Korea and Japan.

The government said it has already provided £539m in research grants and £214m directly to small and medium-sized companies in the semiconductor industry over the past decade. It also plans to help ensure “critical” industries are better prepared for potential supply chain disruptions similar to those that occurred during the Covid-19 pandemic.

The threat of worsening relations between China and Taiwan, which produces more than 60 percent of the world’s chips, has given Western governments additional impetus to boost their domestic industries and strengthen partnerships with allied nations.

On Thursday, Sunak announced a “semiconductor association” with the Japanese government that would include “ambitious R&D cooperation and skills sharing,” strengthening each country’s domestic sectors, and reinforcing supply chain resilience.

It was part of a broader Hiroshima Agreement between the United Kingdom and Japan, which entailed closer economic, security, energy, and technological cooperation between the two nations.

Other chip companies, including California-based Qualcomm, welcomed the UK’s semiconductor strategy. Americo Lemos, chief executive of compound semiconductor wafer maker IQE, said the plan “correctly targets areas where the UK is a world leader.”

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