Britain’s semiconductor startups are calling for policy changes ahead of the country’s budget announcement, as founders try to boost prospects for a sector the government deems as “vital to the UK securing our position as a science and technology superpower”.
Techworks, the UK deeptech and semiconductor trade association representing 280 companies, has published five recommendations for to bolster the success of the country’s startups, which are increasingly being lured overseas by tempting subsidies.
US officials have been encouraging UK chip startups to relocate part or all of their operations to America to benefit from over $50bn in American government funding and subsidies. The EU, meanwhile, wants to mobilise €43bn in public and private investments with its Chips for Europe Initiative, financed by the EU’s Horizon Europe R&D scheme and the Digital Europe Programme.
“UK chip manufacturers and vendors need a level playing field to compete globally and this means, as a minimum, a support mechanism for capital expenditure and access to finance for the necessary step-up expenditure to remain competitive,” says Charles Sturman, CEO of Techworks.
What are startups calling for?
The industry association’s calls for change follow the publication of a UK government 20-year semiconductor strategy, that will see £200m invested between 2023 and 2025.
In absence of the government investing heavily in high-tech industrial growth, Techworks is instead focusing on how private investors can be encouraged to step up their contributions with the help of public incentives.
1. Change rules around R&D tax credits to boost investment in upgrading production facilities
Techworks recommends revising regulations to allow backers of “strategic enhancements to semiconductor manufacturing” to be able to recover more of their investment through tax credits. The existing scheme limits tax credits to 25% of profits and only covers investments into new equipment, which doesn’t cover upgrading equipment to grow production capacity.
2. Match lead investor contributions
Create a public investment scheme for matching contributions from lead investors to support “strategic upgrades to UK facilities” where companies can “demonstrate ability to lead globally” with the help of investment through such enhancements.
3. Encourage procurement
Incentivise domestic demand for homegrown semiconductor technology by setting targets for government and private procurement for British-made hardware.
4. Incentivise institutional investment into chip companies
Address funding challenges for semiconductor companies by de-risking these investments for private funds. The government could address this by encouraging public investment vehicles — like the British Infrastructure Bank — to co-lead rounds into chip companies.
5. Unlock talent through more flexible apprenticeships
Reform the apprenticeship system to increase the supply of engineers and technicians. This could be done by offering employers more flexibility in how they use their Apprenticeship Levy contributions.
