UK Tech: Semiconductor Investment Accelerates as Government Backs Domestic Chip Production
The government’s semiconductor strategy, launched in 2023 following the global chip shortage that had disrupted automotive, electronics and technology manufacturing, is beginning to attract meaningful investment commitments from companies looking to build or expand production capacity in the United Kingdom. The investments are concentrated in compound semiconductor technologies — advanced materials used in electric vehicles, power electronics and defence systems — where UK research capabilities and established industry clusters provide a credible foundation for commercial manufacturing.
Wales has been a particular focus of compound semiconductor investment, with a cluster of companies centred around Cardiff and the South Wales region benefiting from proximity to academic research at Cardiff University and the semiconductor research centre at Newport. The Welsh Government’s active industrial policy in support of the sector has complemented UK Government funding through the Semiconductor Diversification Programme.
Scotland’s established precision engineering and photonics research base, particularly in Edinburgh and Glasgow, has attracted a different set of investments focused on photonic integrated circuits — chips that use light rather than electrons for data transmission, with applications in telecommunications, sensing and quantum computing. The intersection of semiconductor and quantum technology development represents an emerging area of strategic value where UK research is globally competitive.
The Iran war’s disruption of global supply chains reinforced the strategic case for domestic semiconductor capacity that policymakers had been making since the 2021 shortage. Geopolitical risk around Taiwan — where the global semiconductor manufacturing industry is concentrated — has also been a factor in investment decisions, with some companies deliberately diversifying their production footprint to reduce exposure to a potential Taiwan Strait crisis.
