Semiconductor Supply Chain Security

This post sets out Labour for the Long Term's submission to the Labour Party 2023 Policy Forum, responding to question three within the theme 'Britain and the World': “How can Labour build resilience into the international trade system and better ensure the security of essential supply chains?”

Summary:

1. Labour should urge the Government to release its semicondctor strategy.

2. Labour should commit to strengthening semiconductor supply chains in office.

3. A Labour semiconductor strategy should set out policies to: (1) grow the UK semiconductor industry; (2) safeguard the UK against semiconductor supply chain disruption; and (3) secure the UK against the risks associated with semiconductor technologies

The supply chain for advanced semiconductor chips is one of the most strategically important to the present and future of the UK.

‍Currently, the UK, US, and a group of allies exercise a significant advantage over international competitors like China in their ability to produce advanced semiconductor chips. This is a result of strict control over key areas of the supply chain, and translates into significant advantages in the race to develop technologies such as artificial intelligence. These advantages are important for boosting economic growth and ensuring that advanced computing technologies are subject to democratic oversight - and in turn, developed safely and ethically.

This long-held advantage is now at risk as a result of China seeking to establish its own ecosystem for advanced chip production - a development that could ultimately threaten UK access to semiconductors and thereby national security.

The US and EU have taken robust action to increase their semiconductor supply chain security and boost domestic production - with the US passing the CHIPS and Science Act, and the EU set to pass the European Chips Act. The US has also introduced export controls which make it nearly impossible for companies to sell chips, chip-making equipment, and semiconductor software containing US technology to China.

By contrast, the UK Government’s semiconductor strategy is currently half a year overdue (having been promised by Autumn 2022).

‍Labour should urge the Government to release its semiconductor strategy

This is so as to avoid falling further behind our international allies and competitors in safeguarding the semiconductor supply chain.

We also recommend that Labour develop a full set of semiconductor supply chain proposals, to implement immediately upon entering Government.

Below, we set out a series of policies which the next Labour government should implement at a minimum, to protect the UK’s access to semiconductor supplies and ensure national security. This list draws on recommendations made by the CSET, the BEIS Commons Select Committee and the Centre for Policy Studies.

Growing the semiconductor industry

1. Establish government-supported enterprise bodies to coordinate between industry, academia and government in each of the UK’s five existing semiconductor clusters.
2. Provide sponsorship for advanced engineering degrees in partnership with universities in each of the UK’s five semiconductor clusters.
3. Explore the construction of an open access fab in the South Wales semiconductor cluster.
4. Simplify and liberalise the system of R&D tax credits, to allow for greater investment in semiconductor plant and machinery.
5. Explore the creation of a multi-year fund for the semiconductor sector within UKRI.

Safeguarding against supply chain disruption

1. Explore the creation of a new multilateral organisation for cooperation between allied countries on semiconductor supply chains.
2. Request that the UK be invited to take part in relevant parts of the EU-US Trade and Technology Council.

‍Securing the UK against the risks associated with semiconductor technologies

1. Add semiconductors to the list of thirteen sectors currently included within the Government’s definition of ‘critical national infrastructure’.
2. Review the effectiveness of the National Security and Investment Act 2022 in safeguarding the future of the UK semiconductor industry - with specific regard to the process around the Newport Wafer Fab intervention.