UK chip strategy needs an AI acceleration slant

Buried in a 12-page analysis prepared for the government by the Council for Science and Technology (CST) is recognition that Labour’s action plan for artificial intelligence (AI) opportunities lacks any concrete support for semiconductors.

In June, Labour unveiled its industrial strategy, which includes £19m of funding to establish a UK semiconductor centre that will serve as a single point of contact for global firms and governments to engage with the UK semiconductor sector. The Department for Science, Innovation and Technology (DSIT) said the centre would help ambitious firms scale up, form new partnerships and strengthen the UK’s role in global supply chains – helping to grow the economy.

But while the UK starts to build a viable semiconductor sector, the world is moving ahead at an incredible pace due to the growth of AI and the need for AI acceleration chips. The CST believes the UK needs to develop a workforce of chip designers, especially in the area of optoelectronics, which it predicts will be essential to provide the high-speed interconnects required to enable the connectivity of large numbers of graphics processing units (GPUs) to support advances in AI inference and training.

AI chips are forecast to be the largest growth area in the chip industry for the next decade. The authors of the Council for Science and Technology’s Advice on building a sovereign AI chip design industry in the UK analysis noted that there are disproportionate opportunities for businesses – and nations – with the right capabilities, given that six of the seven largest companies in the world are investing billions where they perceive low-hanging fruit for more efficient, faster, lower power AI chips.

The government has a 50-point plan of action for AI, which includes establishing AI growth zones. The CST’s analysis states that “the plan is quiet on UK-designed chips for AI despite the opportunity and the risks”

While there are disproportionate opportunities, the UK should look at the possibility of having a stake in AI chips, which the Council for Science and Technology said would “also help us secure our hardware supply chain for domestic commercial and military applications, in an uncertain era of tariffs and export restrictions”.

This is now more relevant than ever, given recent policy changes in the US, and the risk that US semiconductor technology may be a key bargaining chip that US trade negotiators put into play to exert pressure on trading partners.

Earlier in August, Associated Press reported that Nvidia and AMD had agreed to share 15% of their revenues from chip sales to China with the US government, as part of a deal to secure export licences for the semiconductors.

Some industry watchers have remarked that this sets a dangerous precedent. Policy institute Chatham House warned that while the US administration has argued the case for restricting export of high-end semiconductors to China on grounds of national security, the levy being imposed by the Trump administration represents a way to exert pressure on certain countries.

“The deal sets a concerning precedent with long-term ramifications. It suggests that other companies active in strategic industries could potentially in future pay their way out of burdensome and complex export control regimes, even if they involve key US national security concerns,” wrote Katja Bego, a senior research fellow in Chatham House’s International Security programme, in a recent post on the Chatham House website. 

She warned that this kind of arrangement could also set the scene for the Trump administration to more broadly exercise its ability to control export licensing to influence companies whose supply chains involve the US, such as the high-tech sector.