Small and medium chip makers will be key to the UK’s future as an AI champion according to a government advisory body, with Arm seen as a “missed opportunity.”
A Council for Science and Technology (CST) report said SMEs should be given more access to funding facilities, criticising existing Catapult services as expensive and slow.
It said a successful UK chip industry required “a critical mass of capability” but recommended investment in a fabless approach, outsourcing manufacturing overseas.
Invest early to keep chip makers in UK
The sector has been dominated by CPU-design firm ARM for years, with the Cambridge-based firm responsible for 25% of revenue and 20% of workers recorded in 2024 by the UK’s 623 semiconductor companies.
However, CST said ARM felt like “a lost opportunity” to some due to its majority owner being Japan’s Softbank, its listing on Nasdaq, and the fact most of its workforce sits outside the UK.
"If the UK is to play a large global role in AI, we need more companies designing AI chip products in the UK," said the body, lamenting a "small number of AI chip startups."
Notably, in June another UK chip success story, Alphawave Semi, was swept up by the US’ Qualcomm in a $2.4 billion deal supporting its data centre expansion. Softbank also scooped up AI chip specialist Graphcore in 2024.
To grow the sector, CST said funding body Innovate UK should make grants available to “risky early-stage ventures” and the new £500 million Sovereign AI Unit should invest in companies at the “early, capital intensive phase.”
We need more chip designers
The advice came in a list of five key recommendations made by CST, advocating for 12,000 new chip designers by 2030, investment in optoelectronics, and better signposting of semiconductor opportunities.
With just 9,000 electronic engineers graduating in the UK every year, the sector is likely to see a significant lag in new chip designers, particularly if it is to achieve ambitions of launching 50 new AI chip products this decade.
CST said “UK universities will need to reintroduce electronics and chip design courses” and criticised the government’s AI Action Plan for failing to cover UK-designed AI chips.
The advisory body said UK chip activity had declined since its peak and labelled NVIDIA’s domination in UK data centres as problematic, but predicted a diversification of the AI chip market would present an opportunity.
It said such a change “would also help us secure our hardware supply chain for domestic commercial and military applications, in an uncertain era of tariffs and export restrictions", areas already targeted by the government.
The advice will be mostly welcome news for the UK’s chip sector, which has pushed the government for more support for years, and gave a lukewarm reception to its £1 billion National Semiconductor Strategy.
Despite launching in mid-2023, the strategy is yet to allocate the majority of its funding.
The link has been copied!
