As semi-conductors (aka microchips) are essential components of most electronics goods, small wonder that amidst a global shortage, Western countries are keen to ‘reshore’ their production supply chains away from geopolitical hot-spots such as China and Taiwan.
Taiwan dominates the world’s production of microchips, reports The Times – an island of 24 million people manufacturing more than half the world’s chips.
And even before the Russian invasion of Ukraine in February 2022, global supplies of semi-conductors were a worsening problem – affecting the sales of everything from cars to PlayStation 5 consoles.
Adding to the complexity is the fact that semi-conductors are also a dual-use item in both in civilian and military products.
Increasing chip shortages
Six months into the conflict in Ukraine, these shortages have only increased – given Ukraine supplies 25-35% of the world’s purified neon gas, and Russia supplies 25-30% of palladium, a rare metal used for semi-conductors.
The reshoring effort is being led by the United States, with president Joe Biden this month (August 2022) unveiling the CHIPS Act (Creating Helpful Incentives to Produce Semiconductors Act) – a package of $52 billion in subsidies, loans and tax credits for factories to be built in the US that City AM reports could lure scores of UK-based businesses across the pond.
On top of this, new US export controls on technologies for the production of advanced chips took effect from Monday (22 August) this week.
The EU too
The European Union is planning its own ‘Chips Act’ to increase the production of semi-conductors within mainland Europe. The act builds on the European Alliance on Processors and Semiconductor Technologies launched in July 2021 and aims to “identify current gaps in the production of microchips and the technology developments needed for companies to thrive, no matter their size”.
Meanwhile, Mexico’s economy minister is also said to be looking into providing subsidies to attract innovative chip companies to its country.
UK call to action
The global microchip shortage prompted the Business, Energy and Industrial Strategy (BEIS) Committee in May to launch an inquiry into the strengths and weaknesses of the UK semi-conductor industry and its supply chain. Findings are expected to be published this autumn.
As The Times points out: “Britain has deep academic and industrial expertise in the more high-tech compound semi-conductors, including in Cambridge, Sheffield, Nottingham, Glasgow, University College London and in south Wales”.
Now the boss of British chip design company ARM has told The Times that “a diversified supply chain around semi-conductors is a must-have” for UK businesses.
Rene Haas told The Times: “The pandemic showed the importance of having resilient supply chains. A shutdown in one part of a geographic region could suddenly stop a shipment of a key product. And then the world is not as flat as it was ten years ago in terms of regional conflicts.”
The Haas solution?
He told The Times: “There’s only so much talent in the world that knows how to do this work. So, making it easy for those folks to come into the UK to deliver the work would be hugely beneficial.”.
In July, the UK introduced a new points-based immigration system to attract skills and talent.
At the same time, the government’s Plan for Jobs is focused on helping people across the UK to retrain and build new skills, “with migration policy supporting this drive, not providing an alternative to it”l.