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Welsh Government hits back at UK minister’s claim over semiconductor sector

03 Aug 2023 4 minute read
Photo Welsh Government

The Welsh Government has hit back at comments made by the UK’s technology minister about the country’s chip manufacturing sector after he claimed he did not want to “recreate Taiwan in south Wales”.

Paul Scully, who leads the government’s digital economy strategy, told the Financial Times that the UK’s semiconductor industry will not be joining the global competition to build advanced chip-building facilities.

South Wales, in particular the wider Newport region, already has a cluster of companies that specialise in the design and manufacture of chips which are integral parts of mobile phones, cars, hospital devices and power stations.

The Welsh economy minister Vaughan Gething said the minister’s comments are potentially damaging to possible future investment in the region.

Mr Gething called on the UK Government to “provide an urgent reassurance that the minister’s comments do not reflect Government policy”.

It follows the setting up of a UK Government semiconductor advisory panel to steer the future of the sector.

The group, which includes representatives across business and academia, is expected to meet every two months to oversee a strategy of growing the domestic semiconductor sector, mitigating supply chain disruptions and protecting national security.

One of those invited to take part is the chief executive of Wales-based IQE, Americo Lemos, whose company has a 55% global market share in compound semiconductor technology.

Mr Lemos has previously said that with government support the UK could become a world leader in the production of compound semiconductors, and rival Taiwan.

Niche manufacturing

However, chairman of the group Mr Scully said on Thursday that the UK industry should focus on niche manufacturing and designs rather than try to challenge international rivals in chipmaking.

“To leverage our position, it is about advanced packaging and design. We are not going to recreate Taiwan in south Wales, it’s just not going to happen,” Mr Scully told the FT.

In response, Mr Gething said: “I am extremely surprised by the tech minister’s comments today, which are a real disservice to the talented workforce in the south Wales compound semiconductor cluster.

“The Welsh Government is ambitious for the industry in south Wales, and is working collaboratively with the UK Government to develop it.

“We are currently in active discussions with a number of companies about bringing vital new investment and jobs into the region.

“The UK Government should now provide an urgent reassurance that the minister’s comments do not reflect Government policy.”

A Government spokesperson said: “These suggestions are nonsense. As minister Scully made clear in his interview, the UK Government’s commitment to the South West Wales cluster is unwavering – our strategy focusses narrowly on Britain’s world-leading strengths that are driven by businesses such as IQE in Cardiff and the surrounding region.

“Today, our semiconductor advisory panel met for the first time. The group, which includes representatives from the South West Wales cluster, will drive forward in delivering our ambitious £1bn strategy that doubles down on the UK’s strengths in design, compound semiconductors and advanced manufacturing.”

£1 billion

The UK Government plans to offer chip companies £1 billion over the next decade in a bid to boost the domestic industry, although critics have said the country is “late to the game”.

And the figure pales in comparison to the state investment being seen elsewhere, such as the 52 billion dollars (£41 billion) of subsidies and incentives being offered by the US, and the 43 billion euro (£37 billion) investment plan by the EU.

In a submission to the Business and Trade Committee inquiry into the UK semiconductor industry, the Welsh Government said it had been working to grow the sector in Wales for the last 10 years and said there was a “need for long-term, sustained commitment to the industry to maximise return on investment, and send out the message to the global market that the UK is a suitable destination for investment”.

They also argued for further state support on the grounds that the UK must protect its sovereign capability in semiconductor manufacturing in the wake of vulnerabilities which have been exposed by geo-politics including the trade war between the US and China.

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