[Chip Talk] Semiconductor Strategy 'Hasewol'... Criticism Pours in on UK Government

[Asia Economy Reporter Jeong Hyunjin] This year marks the third anniversary of the United Kingdom's departure from the European Union (EU), and the UK is struggling to establish a semiconductor strategy. The EU has submitted a draft Semiconductor Support Act, which is currently under parliamentary review, but the UK has faced criticism for not yet unveiling a semiconductor strategy since the fall of Boris Johnson's cabinet. Current UK Prime Minister Rishi Sunak is reportedly planning to announce a semiconductor strategy soon to increase self-sufficiency, citing the UK's high dependence on semiconductors from Taiwan, which faces the possibility of invasion by China.

Rishi Sunak, Prime Minister of the United Kingdom
[Photo by EPA Yonhap News]

◆ "Prepared to announce last summer but delayed due to cabinet collapse"

According to the UK daily The Times and others on the 5th (local time), 30 key figures in the UK semiconductor industry, including Jalal Bagherli, former CEO of Dialog Semiconductor, a UK semiconductor design company acquired by Japan's Renesas in 2021, sent a letter to Prime Minister Sunak last month. They criticized, "The industry has waited more than two years for the (government-promised) semiconductor strategy, but the government has taken no action month after month, diminishing our belief that it will be released." They emphasized that the UK's position in the semiconductor market is in crisis and that a strategy should be prepared and announced promptly.

This is not the first time the UK semiconductor industry has raised its voice. In August last year, industry leaders also voiced concerns about the government's insufficient investment, including subsidies. In November last year, members of the UK Parliament's Industry Committee urged the government to quickly release a strategy to maintain the UK's supply chain, according to the daily The Guardian.

The reason the UK semiconductor industry and Parliament have taken such action is that the semiconductor strategy, which the government promised to release by last fall, has yet to be made public. The UK has experienced significant political turmoil over the past two years. After former Prime Minister Johnson lost public support due to the so-called 'Party Gate,' where parties were held at the Prime Minister's office during COVID-19 gathering bans in 2021, he faced a mass resignation of aides last year and was ousted in October, leading to major changes in Parliament and government for about a year. Bloomberg News recently cited sources saying, "Chris Philp, former Digital Minister, and officials were preparing to complete the semiconductor strategy and announce it in the summer of last year," but "the announcement was delayed due to the collapse of Johnson's cabinet."

Politico Europe, citing sources familiar with the strategy preparation, said, "The UK is struggling with internal communication breakdowns and government confusion," adding, "This has caused the UK to fall behind in the major national power struggles to increase self-sufficiency." It also mentioned that the department preparing the strategy, the Department for Digital, Culture, Media and Sport, is small and that the personnel preparing the strategy lack relevant expertise.

◆ Reducing dependence on Taiwan... "Preparing incentives, etc."

Like major countries including South Korea, the US, Europe, Japan, China, and Taiwan, the UK aims to build a semiconductor supply chain. Prime Minister Sunak reportedly mentioned in the draft strategy that Taiwan, a semiconductor powerhouse, faces the risk of invasion by China, which could damage the UK economy, and thus dependence should be reduced. Earlier, the UK ordered Nexperia, a Dutch semiconductor company effectively owned by Chinese capital, to sell most of its shares in the UK semiconductor factory Newport Wafer Fab, citing 'national security concerns.'

The UK is not considered a core player in the global semiconductor market like South Korea or Taiwan. However, Bloomberg reported at the end of last month, citing sources, that the UK government is considering focusing investment on semiconductor sectors where it has strengths, such as compound semiconductors. Although final agreement with the Treasury has not yet been reached, investments worth billions of pounds are expected, including incentives using public funds for semiconductor companies and the formation of a task force (TF) to promote compound semiconductor growth. Politico explained that Jeremy Hunt, UK Chancellor of the Exchequer in Sunak's cabinet, appears to be planning to unveil the strategy in line with the budget announcement scheduled for the 15th of next month.

◆ EU submits Semiconductor Support Act... Germany and others actively attract investment

Unlike the UK, the EU has been interested in semiconductor issues since the early COVID-19 supply chain crisis and proposed the Semiconductor Support Act in February last year, submitting the draft to the European Parliament in early December, accelerating related policy development. This law invests 43 billion euros (about 57.5 trillion KRW) to foster the semiconductor industry within the EU, aiming to increase the EU's global semiconductor production market share from the current 9% to 20% by 2030. It will be implemented after review and approval by the European Parliament. Major European countries such as Germany, France, Italy, and Spain are actively supporting the semiconductor industry by preparing national subsidies in addition to EU support funds.

[Image source=Reuters Yonhap News]

Germany is leading among European countries. German Chancellor Olaf Scholz said at an event last month that Germany could become the largest semiconductor producer in Europe, stating, "This will create an ecosystem that helps EU peace by not relying on other regions." According to the German Trade and Invest Agency (GTAI) report "Germany's Semiconductor Industry" released in December last year, one out of every three semiconductors produced in Europe is made in Germany.

Germany is making efforts to attract investments from global semiconductor companies such as US-based Intel and Taiwan's TSMC. In March last year, Intel announced plans to invest 80 billion euros in Europe over the next 10 years, including 17 billion euros to build a semiconductor factory in Magdeburg, Germany. Although reports surfaced late last year that Intel might suddenly suspend its investment plans in Germany, discussions with the German government regarding subsidies are reportedly ongoing. Foreign media reported late last year that TSMC is considering building its first European factory in Dresden, Germany.