Securing the UK’s Semiconductor Supply Chain
Key point summary
This paper seeks to explore how the UK can work with like minded partners to strengthen the resilience of semiconductor supply chains globally.
Semiconductors are the building blocks of modern life: From smartphones to energy networks and advanced weapons systems, having a resilient supply of semiconductors is vital to the UK’s prosperity and security.
Taiwan plays an indispensable role in the semiconductor supply chain: While no country has a complete end-to-end semiconductor supply chain, Taiwan plays an unparalleled role at the production phase – producing over 70% of the world’s semiconductors and over 90% of the most advanced chips.
China’s threats against Taiwan pose a catastrophic risk to the semiconductor supply chain: Analysts predict that disruption to semiconductor foundries in Taiwan could cost US$490 billion in revenue for electronic device manufacturers annually, with knock-on effects for supply chains in nearly all manufacturing sectors.
The UK is highly exposed to supply chain disruption: This paper calls for the UK government to produce a semiconductor strategy that prioritises three key areas:
Playing to its strengths: the UK has world leading capabilities in semiconductor design, and advanced and compound material semiconductors. Significant investment in human capital, research and development and lowering barriers to attracting global talent are essential to ensuring the UK staying at the cutting edge of these developments.
Cooperating with allies: the UK will not create a resilient semiconductor supply chain alone. It should welcome and seek to play a role in the ‘Chip 4 Alliance’, which seeks to ‘friendshore’ semiconductor production between the US, Taiwan, Japan and South Korea.
Safeguarding Taiwan’s security: Taiwan’s indispensable role in semiconductor supply chains means that maintaining peace across the Taiwan strait must be a strategic priority for the UK. The UK should cooperate with its allies to deter Beijing’s aggression against Taiwan through increased political, economic and defence cooperation in the region.