Government must support semiconductor sector with funds to ward off overseas buyers, says Pragmatic boss

It is cheaper to produce semiconductors “anywhere else in the world” compared to the UK, the boss of a fast-growing technology specialist has warned.

Scott White, chief executive of Cambridge-based semiconductor maker Pragmatic, told City A.M. the government must provide more funding to ensure companies in nascent industries have a true pathway to growth and scaling up manufacturing.

He explained that his team was highly passionate about developing products in the UK, but that he needed to ensure the company could capture the maximum economic value for its semiconductor designs as it ramps up production.

White said: “That’s where the government does need to do more because at the moment, it’s effectively far cheaper for us to go build our next fabrication line anywhere else in the world other than the UK – because there are government support programmes in the US, EU, China, Taiwan and pretty much any other country in the world.”

In his view, a “level playing field” with those competitors was essential if the government wanted to grow manufacturing beyond research stages.

His comments follow warnings from industry bosses last year that the UK lacks a coherent semiconductor strategy.

There have been fresh media reports that the government plans to subsidise semiconductor companies in a bid to support domestic chip manufacturing and ward off overseas giants.

The taxpayer funds will include financing for start-ups, help for existing groups and new incentives for private venture capital, according to Bloomberg.

However, there have been fresh delays in the publication of the UK’s semiconductor strategy, which was expected to be released in the new year – having already been postponed from its initial autumn 2022 date.

By contrast, the US Chips Act was passed last summer and includes £42.3bn worth of support for any semiconductor businesses operating in the US.

The EU Chip Act, which was launched in February 2022, will funnel around £39bn worth of investment into the sector.

China dwarfs them both, boasting over £105bn worth of state and private funds to be issued out between 2020 and 2025. 

Funding key for boosting semiconductor sector

Pragmatic produces wafer thin, disc-shaped semiconductor devices made out of metal oxide as an alternative to the dominant silicon players on the market.

The product has been used as a replacement for silicon when there are supply shortages, but its key growth market is the extension of electronics into new products that never included silicon chips.

This includes smart packaging for fast-moving consumer goods.

White explained: “If you think about everything you buy in the supermarket that’s in a box or a plastic bag and being able to embed electronics into that packaging, to allow better traceability of that product through its lifecycle. This includes up to the point of disposing the packaging and making sure it’s recycled or reused in the most optimum way.”

Alongside further financial support for growing companies in key industries, he also called on the government to boost domestic demand for technology.

He said: “The UK is a small country, we’re not going to be the largest part of global demand, but the stronger domestic demand we have for the technology, the easier it is to justify scaling manufacturing here and capturing the value for it here.

“So, that’s another area where we see the government has a key role to play, either via direct public procurement, or via policy initiatives around things like net zero elimination of single-use plastics where technologies like ours can help provide the solution.”

Without reforms, he feared the UK would see more companies pitch for overseas investment, with the government recently having to overrule a takeover of the semiconductor firm formerly known as Newport Wafer Fab due to the buyer’s links to Chinese state investment.

In its latest funding round, over 80 per cent of Pragmatic’s support came from overseas investors.

White said: “We have a very good ecosystem for early stage technology and venture investment, and support for development of new technologies. But as companies get to the later stage, and it tends to be much more concentrated in the amount of capital they need, that’s actually where we’ve got a bit of a gap.”

When approached for a comment, a spokesperson for the department for culture, media and sport said: “We are committed to supporting the UK’s vitally important semiconductor industry. We are reviewing our domestic capabilities to develop a new semiconductor strategy which will grow the sector further and make sure we have a resilient supply chain. Our strategy will be published as soon as possible.”