UK faces complex decisions on future of chip sector
Controversy over the recent sale of Welsh semiconductor foundry Newport Wafer Fab (NWF) to one of its customers — Dutch chipmaker Nexperia, owned by Chinese technology group Wingtech — has raised questions about how best to protect and develop the UK's semiconductor industry, with some onlookers warning that any legislative tools may fall short without an overarching plan for moving the sector forward.
The sale was completed in July but was swiftly followed by protests from senior political figures who questioned the advisability of selling a UK semiconductor asset to a Chinese-controlled entity. Prime minister Boris Johnson on 7 July instructed the UK's national security adviser, Stephen Lovegrove, to review the transaction, with a report due to be released in the near future. Meanwhile, UK businessman Ron Black has put together a consortium to offer a rival bid should the government intervene. Legislation designed to protect critical infrastructure and technology from external threats — the National Security and Investment Bill — will come into force on 4 January 2022, effectively providing a legal route to invoke a retrospective mandate to freeze the sale.
NWF was built in 1982 by one of the world's first semiconductor companies, Inmos. Inmos was founded in 1978 by an English and a US engineer with a £50mn ($70mn) grant from the UK government through the National Enterprise Board. Inmos produced the world's most advanced memory chips and captured over half of the global market. But it fell victim to a boom and bust in the memory market, a cyclical trend that persists today. And the parallel processing architecture that Inmos envisioned, the transputer, failed to become the dominant technology.
Almost four decades and a string of corporate owners later it became what is known as an open access foundry. Open access foundries sell manufacturing capacity to other companies that choose to produce their chips there. Prior to the acquisition, Nexperia was one of its customers and its main product line was a type of advanced power transistor called a MOSFET, used for switching in power applications. It is a high-volume product with global demand of around 100bn devices a year. NWF is one of the UK's largest chipmakers along with Nexperia in Manchester and Gfab in Greenock Scotland (see map). Gfab is owned by US semiconductor manufacturer Diodes, which bought it from Texas Instruments in April 2019.
The UK has around 23 fabrication plants, some capable of producing over 1bn chips/yr. The silicon plants are mostly on older platforms. But there is also a high concentration of capacity to produce a type of next-generation chip called a compound semiconductor. These combine different elements to make highly engineered chips for specific applications. NWF was also entering this market by offering foundry services to compound semiconductor companies and had won several contracts from the UK government-funded Innovate UK.
A recent report from the Department for Business, Energy and Industrial Strategy highlighted the critical nature of the industry and the need for a strategy to secure resilience and build upon the UK's semiconductor capabilities.
Chipmakers' planning problem
The investment timeline for going from an empty lot to a profitable chip manufacturing facility can be as long as 10 years. This, combined with high capital and operating costs, has created an active secondary market, and plants around the world can go through many corporate owners. The risk for an older plant is that if it is not upgraded to newer platforms, it is destined to become a silicon workhorse operated flat out until its production process becomes obsolete.
But there are even more serious implications. Automakers around the world are all too painfully aware of the consequences of sudden events creating a mismatch between demand and supply. The Covid-19 pandemic has resulted in volatile swings in demand for automotive chips, causing reverberations and repercussions in the supply chain that continue to wreak economic damage across the industry.
A strategic solution
The level of trust and understanding between governments and the semiconductor industry is light years ahead of where it was in the early days of computers. In the 1980s, when a senior economic adviser to the White House quipped "computer chips or potato chips there is no economic difference", the president of a large US chipmaker sent him a violin with a note attached that read "fiddle on this while Silicon Valley burns".
But what has changed in the meantime is the complexity of the industry. The most complex manufacturing process on earth produces a product that is so small and so light it can be sent in the post. This unusual quirk, combined with some extraordinary economic pressures and relentless technological advancement, means that where once a chip company designed, manufactured and sold chips, that is now the rare exception. Different stages of the process have evolved into separate industries. The semiconductor sector has the largest global footprint of any industry, which makes it uniquely vulnerable to global political tensions. And industry experts warn that without an over-arching plan, the ability of the UK to protect its semiconductor industry, regardless of the legislation at its disposal, will be limited.
By Caroline Messecar
![](https://public-assets.argusmedia.com/2021/09/07/andyfabmapfinal07092021101057.jpg)
Related news posts
Fortescue hold firms on 2024-25 iron ore target
Fortescue hold firms on 2024-25 iron ore target
Beijing, 30 August (Argus) — Australian iron ore producer Fortescue has reiterated its iron ore shipment target for the 2024-25 fiscal year ending 30 June of 190mn-200mn t, including 5mn-9mn t from its Iron Bridge project on a 100pc basis. The Iron Bridge magnetite project in Western Australia shipped its first cargo in July last year, with Fortescue's iron ore shipments totalling 191.6mn t for the full year . It had targeted to ship 192mn-197mn t for 2023-24. The company achieved a hematite average revenue of $103/dry metric tonne (dmt), up by 9pc on a year earlier. Hematite C1 costs for 2023-24 rose by 4pc from the previous year to $18.24/wet metric tonne (wmt) because of higher labour rates and mine plan driven cost escalation, although Fortescue said its cost control measures offset the partial increase. It forecasts hematite C1 costs for 2024-25 to rise to $18.50-19.75/wmt. The Argus ICX seaborne iron ore fines assessment for 62pc Fe cfr Qingdao averaged $119.40/dmt for 2023-24. Fortescue is on track to achieve real zero, or no fossil fuels and no offsets, for its scope 1 and 2 terrestrial emissions across its Australian iron ore operations by 2030. It is aiming to achieve this with building a new solar farm, deployment of electric excavators and the use of battery electric and hydrogen fuel cell haul truck prototypes. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US OCTG, line pipe imports fall in July
US OCTG, line pipe imports fall in July
Houston, 29 August (Argus) — Preliminary data from the US Department of Commerce shows that imports of oil country tubular goods (OCTG) and line pipe products fell in July. OCTG volumes fell by 88,100 metric tonnes (t) from the prior year, as volumes from Japan dropped by 15,500t, South Korea and Thailand both dropped by 13,500t, and volumes from Vietnam and Mexico fell by 11,300t and 9,300t, respectively. Volumes of line pipe less than or equal to 16in fell by 12,300t, as Italian volumes dropped by 4,500t, Ukraine dropped to zero from 4,400t in the prior year, and Brazilian volumes fell by 3,100t. Standard pipe imports increased by 13,400t on a 7,900t increase from Turkey. Heavy structural shape volumes jumped by 39,700t as Spanish volumes increased by 21,700t from the prior year, and imports from Germany rose by 9,200t. By Rye Druzchetta US pipe and tube imports metric tonnes Product Jul-24 Jul-23 Volume change ±% Jun-24 OCTG 95,792 183,909 -88,117 -47.9% 126,760 Line pipe 69,387 80,875 -11,488 -14.2% 87,976 Standard 66,100 52,716 13,384 25.4% 76,317 Heavy Structural Shapes 107,979 68,253 39,726 58.2% 54,096 US Department of Commerce July 2024 data is preliminary data, which is subject to change. Line pipe is all diameters. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Higher flats volumes lead US steel imports up
Higher flats volumes lead US steel imports up
Houston, 29 August (Argus) — Higher volumes of flat steel imports led overall US steel imports higher in July. Total US steel imports for consumption were 2.2mn metric tonnes (t) in July, according to preliminary data from the US Department of Commerce. Hot-rolled coil (HRC) imports rose by 22,600t from the prior year, driven by a 32,900t jump in Japanese volumes, which were offset slightly by a 9,200t drop from Canada. Cold-rolled coil (CRC) volumes were up by 37,000t in July, with Canada exporting 8,800t more than the prior year. Hot-dipped galvanized (HDG) coil imports from Brazil jumped by 17,200t from the prior year, while volumes from Mexico rose by 13,000t. Volumes of blooms, billets and slabs dropped by 121,900t, as Mexico's volumes dropped to zero from 95,800t in the prior year. By Rye Druzchetta US steel imports metric tonnes Product Jul-24 Jul-23 Volume change ±% Jun-24 HRC 156,952 134,326 22,626 16.8% 156,861 CRC 172,746 135,778 36,968 27.2% 113,400 HDG 233,511 165,607 67,904 41.0% 238,809 Blooms, billets, slabs 364,138 486,053 -121,915 -25.1% 395,478 Total (all items)* 2,197,347 2,153,126 44,221 2.1% 1,955,800 US Department of Commerce July 2024 data is preliminary data, which is subject to change. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
ThyssenKrupp Steel executives leave as tensions rise
ThyssenKrupp Steel executives leave as tensions rise
London, 29 August (Argus) — Seven board and supervisory board members of ThyssenKrupp Steel Europe have left their positions given deepening strife with the chief executive of parent company ThyssenKrupp. There has been an ongoing dispute between ThyssenKrupp chief executive Miguel Lopez and board members of ThyssenKrupp Steel Europe, including the latter's chief executive Bernhard Osburg, for some months now over the future of the business. Osburg and two other board members from Steel Europe have now stepped down, as has the chairman of the Steel Europe supervisory board Sigmar Gabriel and three other supervisory board members. The members have "lost all confidence in the will and ability of the chairman of the executive board of ThyssenKrupp AG to co-operate appropriately", Gabriel said in a note after a meeting today. He said Lopez has carried out an "unprecedented" and public campaign against the executive board of Steel Europe, damaging its ability to act and breaching trust. The Steel Europe board had proposed a plan to align the business' production to its recent shipments, meaning a decline from about 12mn t/yr to 9mn t/yr, and to exit from steelmaker HKM's joint venture with Salzgitter and Vallourec. HKM is viewed as a high-cost slab producer. However, Lopez felt the plans did not go far enough to restructure the business, calling for a deeper reorganisation and reduction in headcount. A spokesperson for union IG Metall said it "strongly" supports Osburg and the outgoing chairman, and criticises the actions of Lopez. The union is not legally allowed to call for strike action, but has called for protests over the departures. One executive said the dispute could threaten the future of Steel Europe as an entity. By Colin Richardson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
![Generic Hero Banner](/_next/image?url=%2F-%2Fmedia%2Fproject%2Fargusmedia%2Fmainsite%2Fimages%2F14-generic-hero-banners%2Fherobanner_1600x530_generic-c.jpg%3Fh%3D530%26iar%3D0%26w%3D1600%26rev%3D8ec86dce0f724687bd325a9a917cffae%26hash%3D9FD39B08C9D84A160C91A3649C40A186&w=3840&q=75)
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more