Britain launches electronic revolution amid fears of war between China and Taiwan

Ministers are planning a British electronics revolution to protect the country if China invades Taiwan and cripples the global microchip market.

Chancellor Jeremy Hunt and Science Minister Michelle Donelan are drafting a “semiconductor strategy” as part of broader measures to reduce Britain’s dependence on the Asian market for vital electronic components.

Taiwan — which China sees as a breakaway “province” that will eventually be placed under Beijing’s control, if necessary by force — produces a staggering 90 percent of the world’s most advanced microchips, which are used in smartphones, computers, cars and military hardware.

Chinese President Xi Jinping has said that “reunification” with the island, just 100 miles off the coast of southeast China, “must be accomplished” and has staged a series of military showdowns in the Taiwan Strait.

Culture Secretary Michelle Donelan speaks at the Conservative Party’s annual conference

Employees work at a semiconductor factory in Hsinchu, Taiwan

American intelligence says it has ordered its military to be ready by 2027 for an attack that would involve the largest amphibious invasion force since the Allied landings on D-Day. However, the US fears that military force could be used as early as 2025, after the next American presidential election.

Allowing Taiwan’s electronics industry to fall into Chinese hands would be a major strategic blow to the West.

The UK’s reliance on foreign microchips became apparent when the Covid crisis caused an acute disruption to supply chains, prompting a riot within Whitehall to boost domestic production.

A senior government source said: “We are working on a so-called ‘coiled spring’ model that will focus on our strengths in semiconductor design and invest in research and development as we forge new international deals with Western allies like the US. Japan and the Netherlands.

“The ultimate goal is to create a semiconductor manufacturing industry in the UK.”

The move is likely to spark a battle for the most talented experts in the field with the US, which has also pledged to boost its microchip industry.

President Joe Biden last year committed $52 billion (£43 billion) to boost microchip production and help “win economic competition in the 21st century.” US Secretary of Commerce Gina Raimondo said, “Our reliance on Taiwan for chips is unsustainable and uncertain.”

Taiwan makes 65 percent of the world’s semiconductors and nearly 90 percent of advanced chips for customers like Apple. China has also sought to increase its semiconductor manufacturing capacity and recently pledged £123 billion to expand the industry.

Great Britain’s high-tech companies are mainly concentrated in the so-called Silicon Fen around Cambridge.

No date has yet been set for the announcement of the new strategy as the funding level is still being negotiated in the Ministry of Finance.

Experts warn that semiconductor strategy efforts come after years of neglect have sabotaged the sector

From Luke Barr and Francesca Washtell Deputy City Editor

Efforts to build a semiconductor strategy in the UK have been sabotaged by years of neglect.

The industry has repeatedly asked ministers to put in place a comprehensive plan detailing areas such as funding and skills.

The government has also been criticized for allowing the UK’s largest semiconductor maker, Newport Wafer Fab, to sell to a Chinese buyer in 2021 without an investigation. This was later overturned after outcry from MPs and security experts.

But the lack of clear support for the sector has resulted in a lack of enthusiastic investors and has led to innovative companies looking abroad to set up their businesses and obtain financing.

Chancellor Jeremy Hunt is outlining a “semiconductor strategy” as part of broader steps to reduce Britain’s dependence on Asia’s market for vital electronic components

The lack of confidence in the industry was exposed earlier this month when Cambridge-based chip designer ARM Holdings, the jewel in the UK’s semiconductor sector, declined a listing in London in favor of New York. It was a major blow to the city after officials at the Treasury and the London Stock Exchange spent months courting ARM’s owner, Japan’s SoftBank.

The government previously promised to release a semiconductor strategy, but nothing came. A report by the Economic, Energy and Industrial Strategy Committee stressed that preparation “has already taken two years” and that it “needs to be published urgently”, with MEPs adding that the delay was “difficult to understand”.

The lack of a domestic industry has left UK manufacturers, including some of the UK’s biggest carmakers, facing global shortages after supplies of chips were disrupted during the pandemic. Semiconductors are essential to all modern electronic systems. Even before Covid, there was a global shortage of factories to meet the growing demand for chips in everything from “smart” refrigerators to cell phones.

But there are also shortages of key parts like silicon components and rare earth metals. China has a stranglehold on the supply of most of these materials.

The government said earlier this year that it was in “discussions with like-minded nations” to help bolster the UK’s semiconductor capabilities, but a full plan has yet to be worked out. Whitehall was urged to work more closely with allies in the EU and US to secure future semiconductor supplies.

An industry source: “I don’t think the UK can compete financially with the US.”

He added that it was “impossible” for the UK to match the manufacturing capabilities of the US and China.