UK to unveil masterplan to enter microchip ‘Cold War’

US and UK missile destroyers put out of action by microchips

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Britain is set to use taxpayer cash to support UK firms developing microchips – the vital components of a vast array of technologies – which have become a major symbol of geopolitical power over the last few years. Officials familiar with the plans have claimed that the state will pour seed funds into British start-ups and will help existing firms scale up as the UK scrambles to gain a foothold in the global semiconductor industry.

Microchips have been described as the “brains” powering almost all electric circuit devices, from smartphones and computers to cars and washing machines. They could even be used to make weapons, which the West fears China may well do.

For these reasons, the technology is thought to be of significant strategic importance geopolitically as economies vie for control of the fiercely competitive market. The battle for dominance in the sector has even been referred to as a new technological “Cold War” between the US and China.

With Taiwanese chips accounting for 20 percent of global supplies, Asia has been storming ahead, leaving the West playing catch-up after decades of underinvestment.

The EU and US had already been scrambling to set up new manufacturing plants at pace to narrow the gap. Now, the UK looks set to get involved too, which could help slash its reliance on imports and make it more competitive in the post-Brexit landscape.

Officials close to the matter have said that ministers will set up a semiconductor task force to coordinate public and private support to boost the UK’s manufacturing of compound semiconductors in the next three years, Bloomberg reports.

An overall figure has reportedly not been agreed with the Treasury but is expected to be in the single figure billions of pounds, a person familiar with the plans has said. Under the new strategy, public funding will come from existing programs such as the British Business Bank, Innovate UK and the National Security Strategic Investment Fund.

This also comes as the US has been attempting to cripple China’s chip industry by limiting exports of the technology to the nation, also as part of efforts to ensure it can’t use them to create new weapons. The UK’s push to boost local semiconductor production could be seen as helping to boost Western efforts to weaken China’s stronghold.

Local production could also help slash reliance on semiconductor imports from Taiwan. This is significant as there are fears over a Chinese takeover of the island it claims to have sovereignty over.

While Britain is relatively strong in areas like design, it has limited chip manufacturing facilities and companies have repeatedly been taken over by foreign firms.

Now, Culture Secretary Michelle Donelan has reportedly reviewed a draft chip strategy and is close to approving a version for publication in the coming weeks, a person familiar with the situation told Bloomberg.

However, the final draft is not yet finalised and the Government has refused to “comment on speculation”, a spokesperson said.

But the strategy does warn that the supply of chips is a significant geopolitical and economic issue. It requires Britain to diversify its market with other microchip exporters from friendly and safe nations, and funnel billions of pounds more into research and development.

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This comes after key figures in Britain’s tech community wrote a letter to the Prime Minister this week, urging him to publish a long-awaited semiconductor strategy as a “matter of urgency”.

The open letter, signed by tech leaders from institutions like techUK, Tech London Advocates, Birmingham Tech, read: “Semiconductors are the vital components that power our lives every day.

“Britain has traditionally been a world leader in the field — home to world-leading chip design companies and leaders in the compound semiconductor segment,” they wrote.

“However, the industry needs a coordinated and comprehensive semiconductor strategy. The technology and manufacturing sectors have been waiting more than two years for the promised strategy, and confidence in the government’s ability to address this industry’s vital importance is steadily declining with each month of inaction.”

But while the West battles to constrain China’s semiconductor sector, Beijing could undermine the sanctions imposed on its industry after it figured out a microchip design method that had previously only been cracked in the West.

Huawei’s advances in the crucial method of chip manufacture could allow it to start producing some of the smallest and most powerful microchips without external help, The Telegraph reported.

Currently, sanctions slapped down by Washington, Brussels and London are preventing China from accessing Western-made chips over fears that Beijing could use them to develop new military capabilities that could surpass the potential of Western armies.

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