February 2024 – In support of the National Semiconductor Strategy, new funding from the UK has been invested to bolster the research by British scientists into chip development. Semiconductors are integral components in a multitude of devices, underscoring the necessity of this research for driving future advancements in net zero initiatives, AI, and quantum technologies1.
Two new ‘Innovation and Knowledge Centres (IKC)’ will receive £11 million each to help bring new chip technologies to market and to coincide with the Department for Science, Innovation and Technology’s one-year anniversary. £4.8 million in funding for semiconductor skills projects has also been announced.
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The semiconductor value chain is one of the most complex and vulnerable globally, as was proven by the recent shortage and the enormous impact that had on electronics and automotive manufacturing. The industry is inherently disaggregated in nature, with thousands of production stages traditionally spread globally. The intricacies and interdependencies between these stages, as well as the concentration and specialisation of elements, creates inherent fragility. In particular, much of the manufacturing takes place within South East Asia, and more specifically in Taiwan, where demand for the products expands globally. Geopolitical challenges impacting the concentrated areas can, in essence, halt the value chain from operations.
This vulnerability is increasingly being noticed, not just in the semiconductor industry, but wider industries too which is prompting governmental action. Notably, in 2024 the UK Department for Science, Innovation and Technology (DSIT) announced £22 million of funding to support two ‘Innovation and Knowledge Centres’ to bring new chip technologies. This supports the National Semiconductor strategy published in May 2023, which committed to investing up to £1bn in the domestic semiconductor industry and working towards mitigating the risk of supply chain disruptions as two of the key objectives.
The US also felt the impact of supply chain failures in the industry, particularly through the pandemic, and have initiated similar policies. The CHIPS and Science Act, introduced in 2022, committed to $52.7 billion in new funding to boost domestic research, development, manufacturing and supply chains of semiconductors. Much of the policy narrative and positioning was focused on domestic job creation, economic prosperity and national security – all of which are valid, but in reality, much of the focus is on ensuring the stability of the supply chain for other manufactured products in the long-term.
We expect that increasingly protectionist policies both within the UK and the US will be followed closely by other developed nations. The industry will quickly follow, with manufacturing operations and supply chains relocating to maximise the opportunity from such funding. Strategic shifts of this nature will provide a prime opportunity for organisations to consider the make-up of their supply chain, evaluate the appropriateness of their current logistics structures and ultimately pivot the business operating model to enable the change.
Connect with James Stanley, Head of Strategy at Unipart Consultancy, to collaborate towards operational excellence, supply chain optimisation, or transformative strategies. Reach out to James Stanley should you wish to further discuss the topic of semiconductor investment and the impact of semiconductor supply chains globally.
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