Welsh government disappointed over minister's downplaying of chipmaking potential

Paul Scully said the semiconductor industry cannot 'recreate Taiwan in South Wales'

The Welsh economy minister Vaughan Gething has criticised comments made by UK technology minister Paul Scully about the country's semiconductor industry after he claimed that the chip sector in the UK cannot 'recreate Taiwan in South Wales.'

In an interview with the Financial Times, Scully emphasised that the UK's semiconductor industry will not be participating in the global competition to establish advanced chip-building facilities, despite concerns raised about the government's level of investment, with some fearing it may not be sufficient to compete effectively on an international scale.

Scully added that the UK should prioritise niche manufacturing and design, rather than attempting to compete directly with the US and China through massive state subsidies and investments in chip-making factories.

Scully believes that focusing on specialised areas will enable the UK to carve out its unique position in the semiconductor industry and capitalise on its strengths.

"To leverage our position, it is about advanced packaging and design," he told the FT.

The minister also advocated that the UK should position itself as an integral part of the semiconductor supply chain instead of directly competing in manufacturing.

"We are not going to recreate Taiwan in south Wales," he said. "It's just not going to happen."

"The opportunity that we have if we get this right, [because of] the ramping-up of the need for semiconductors, is huge," Scully added.

"So we can really make the most of that, but we're not going to do it through just a massive load of fabs in the UK."

Responding to Scully's statement, Vaughan Gething expressed concern that the minister's comments could have a negative impact on potential future investment in the region.

South Wales, particularly the wider Newport region, already boasts a cluster of companies specialising in chip design and manufacturing. These chips play essential roles in various industries, such as mobile phones, automobiles, medical devices and power stations.

"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," Gething said.

"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."

Gething urged the UK government to offer reassurance that the minister's comments do not reflect the official policy of the government.

In May, the government unveiled the National Semiconductor Strategy, which proposes to allocate a total of £1 billion in funding for British chip companies over the next decade.

The investment will be directed towards reinforcing existing strengths, particularly in the field of chip designs, an area that is currently led by prominent companies like Arm, headquartered in Cambridge.

On Thursday, the government finally announced the members of its long-awaited semiconductor advisory panel, which will be responsible for overseeing the implementation of the National Semiconductor Strategy.

The panel comprises representatives from various sectors, including business and academia.

Their main objective will be to convene every two months and diligently supervise the strategy's execution, with a particular focus on fostering the growth of the domestic semiconductor sector.

Additionally, they will work on finding ways to address supply chain disruptions and safeguarding national security concerns related to the semiconductor industry.

Among those invited to participate in the semiconductor advisory panel is Americo Lemos, the chief executive of IQE, a Wales-based company that currently holds a remarkable 55% global market share in compound semiconductor technology.

Lemos has expressed optimism about the UK's potential to become a leading force in compound semiconductor production, capable of rivalling Taiwan, provided that the government provides adequate support.

In June, semiconductor industry group SLG said the UK market does not properly understand the needs of the sector as it gears up to meet the requirements of AI, Net Zero and quantum computing.