Fifth Report - The semiconductor industry in the UK

The government's response

What the committee recommended 14

1. 1
   The UK is an important part of global semiconductor supply chains, but it is reliant... Recommendation · paragraph 52
2. 2
   We ask Ministers to consider whether the above recommendation, on closer working between the UK... Recommendation · paragraph 53
3. 3
   The exercise of controls under the National Security and Investment Act is still at an... Conclusion · paragraph 66
4. 4
   We will further consider the Nexperia case, via the National Security and Investment Sub-Committee, once... Conclusion · paragraph 67
5. 5
   Semiconductors play a hidden but highly significant role in many parts of the UK’s critical... Recommendation · paragraph 70

See all 14 recommendations and conclusions

Sources

• Fifth Report - The semiconductor industry in the UK ↗The committee's report, HC 291, parliament.uk
• Sixth Special Report - The semiconductor industry in the UK: Further Government response to the BEIS Committee’s Fifth Report of Session 2022–23 ↗The government's response, 25 May 2023, parliament.uk

Recommendations and conclusions 14

1. 1
   The UK is an important part of global semiconductor supply chains, but it is reliant... Recommendation · paragraph 52 · addressed to Department for Business and Trade Recommendation (the committee's words)

   The UK is an important part of global semiconductor supply chains, but it is reliant upon other countries. The UK alone will not have an end-to-end supply chain for semiconductors, but it has tradeable strengths. The Government should work more closely with allies in the EU and US, and elsewhere, to safeguard security of supply, both of finished products and of the materials needed for production in the UK. The Government should at the same time be working to represent the UK’s expertise and to entrench and expand the UK’s role in global semiconductor supply chains.
2. 2
   We ask Ministers to consider whether the above recommendation, on closer working between the UK... Recommendation · paragraph 53 · addressed to Department for Business and Trade Recommendation (the committee's words)

   We ask Ministers to consider whether the above recommendation, on closer working between the UK and allies in the EU and US, can be effectively delivered by requesting that the UK be invited to take part in relevant parts of the EU-US Trade and Technology Council. We further ask Ministers to set out the Government’s position on whether a new multi-lateral organisation for industrial collaboration between allied democratic countries is required and, if not, which existing multi-lateral organisation provides the opportunity for this important work to be undertaken.
3. 3
   The exercise of controls under the National Security and Investment Act is still at an... Conclusion · paragraph 66 · addressed to Department for Business and Trade Conclusion (the committee's words)

   The exercise of controls under the National Security and Investment Act is still at an early stage. We note reservations about the speed of some assessments under the Act and under the export control process, and we will be conducting scrutiny of how powers under the National Security and Investment Act are being used via our National Security and Investment Sub-Committee. Nevertheless, it is our view that the overall purpose of the Act in monitoring acquisitions with a view to safeguarding national security is sound. We believe that it has the potential to help meet concerns about hostile access to intellectual property, knowledge and expertise within the semiconductor industry, and such powers should be used to avoid this.
4. 4
   We will further consider the Nexperia case, via the National Security and Investment Sub-Committee, once... Conclusion · paragraph 67 · addressed to Department for Business and Trade Conclusion (the committee's words)

   We will further consider the Nexperia case, via the National Security and Investment Sub-Committee, once the period for appeal has expired. In the meantime, the Department should work proactively to ensure a successful transfer of the Newport site to a new owner. Ministers should update the Committee on progress made.
5. 5
   Semiconductors play a hidden but highly significant role in many parts of the UK’s critical... Recommendation · paragraph 70 · addressed to Department for Business and Trade Recommendation (the committee's words)

   Semiconductors play a hidden but highly significant role in many parts of the UK’s critical national infrastructure. We request that the Government sets out which elements of the semiconductor supply chain constitute critical national infrastructure.
6. 6
   We recognise that many Government departments have an interest in the semiconductor industry, and that... Conclusion · paragraph 79 · addressed to Department for Business and Trade Conclusion (the committee's words)

   We recognise that many Government departments have an interest in the semiconductor industry, and that these interests may overlap. But, in our view, the value of semiconductors to so many sectors of the UK economy and to UK national infrastructure, combined with the national security necessity of safeguarding 40 The semiconductor industry in the UK semiconductor supply, make it essential that a single Government department takes responsibility for nurturing the semiconductor industry in the UK and for security of supplies. We believe that that department should be BEIS, because of its overarching responsibility for industrial strategy, business support, engagement with industry and policy on research funding, and because of its role in protecting UK industrial assets from undue control by overseas entities.
7. 7
   While it is for those in the semiconductor industry to decide how to champion its... Conclusion · paragraph 81 · addressed to Department for Business and Trade Conclusion (the committee's words)

   While it is for those in the semiconductor industry to decide how to champion its causes, we believe that there is scope for the sector to play its part in improving the clarity of communication between the industry and Government, for instance through a collective voice for the sector.
8. 8
   The Government was correct in its decision to instigate a review of its approach to... Recommendation · paragraph 85 · addressed to Department for Business and Trade Recommendation (the committee's words)

   The Government was correct in its decision to instigate a review of its approach to the semiconductor sector and in heralding a new strategy. The industry has waited for the strategy and will base crucial decisions upon it. The Government should lose no more time and should publish its Semiconductor Strategy immediately.
9. 9
   We recommend that the forthcoming Semiconductor Strategy should include: • An analysis of the semiconductor... Recommendation · paragraph 91 · addressed to Department for Business and Trade Recommendation (the committee's words)

   We recommend that the forthcoming Semiconductor Strategy should include: • An analysis of the semiconductor production and supply chain, recognising different characteristics for different subsectors of the industry, and areas of strength and weakness; • A heatmap, showing where different semiconductor industries and niches are located within the UK, and how they are positioned in relation to the supply of relevant skills, equipment, research capability, and in relation to other factors valued by firms in those industries; and • An account of which industries in the UK and which key products are dependent upon a secure supply of semiconductors at reasonable cost. • In addition, we recommend that the Government produces a risk and resilience strategy for the semiconductor industry alongside its Semiconductor Strategy, as a matter of urgency.
10. 10
    We recommend that the Government’s Semiconductor Strategy consider scope for development of the UK semiconductor... Recommendation · paragraph 94 · addressed to Department for Business and Trade Recommendation (the committee's words)

    We recommend that the Government’s Semiconductor Strategy consider scope for development of the UK semiconductor industry in the following fields: • Intellectual property and design; • Supporting the design chain for leading edge node chips; • Matching UK manufacturing capability to UK design capability; • Developing manufacturing processes for silicon semiconductors; • Development of existing strengths in compound and advanced material semiconductors, to meet demand in emerging markets; • Facilitating the construction of new fabs, including consideration of an open access fab in the South Wales cluster.
11. 11
    It is not clear to us that the support currently offered by Government is at... Conclusion · paragraph 117 · addressed to Department for Business and Trade Conclusion (the committee's words)

    It is not clear to us that the support currently offered by Government is at anything like the scale which is needed to make a real difference, or in line with a clear strategy from Ministers.
12. 12
    The Government must not overlook the semiconductor industry. Recommendation · paragraph 118 · addressed to Department for Business and Trade Recommendation (the committee's words)

    The Government must not overlook the semiconductor industry. Whilst we recognise the difficult fiscal picture in the UK, we call on Ministers to set up a new sector deal as the vehicle to work with industry to agree UK priorities and the best use of any public funds or support. This could be via additional funding or guarantees made available via the Compound Semiconductor Applications Catapult, Innovate UK or the British Business Bank. The British Business Bank should lead on scale-up investment and capital investment from public and private sources, whilst the Catapult should continue to bridge the gap between research and industry, to support start-ups.
13. 13
    The UK is missing out on inward investment at a crucial time for the semiconductor... Recommendation · paragraph 121 · addressed to Department for Business and Trade Recommendation (the committee's words)

    The UK is missing out on inward investment at a crucial time for the semiconductor industry, and we are competing with other countries. The Government should secure partnerships via the US CHIPS Act, and engage with Taiwanese and other major companies to secure significant inward investment in the UK.
14. 14
    We welcome the steps being taken by the Government to encourage talent from overseas, although... Recommendation · paragraph 131 · addressed to Department for Business and Trade Recommendation (the committee's words)

    We welcome the steps being taken by the Government to encourage talent from overseas, although it has yet to be seen whether they will help to solve the challenges faced by the semiconductor industry in recruiting and retaining workers with the necessary skills. The forthcoming Semiconductor Strategy should not shirk this issue and should set out how the Government plans to meet the very specific skills needs of the UK semiconductor industry.