Thirty years ago, Europe commanded nearly a fifth of the global semiconductor market. Today it holds less than 10%, and the UK’s share has shrunk to barely half a percent. On paper, that looks like failure. In reality, the picture is more complex. Beneath these headline numbers sits a set of capabilities, quiet, highly specialised, and globally relevant. How can the UK build on these? 

The first step is recognising that the UK is not trying to win the semiconductor race on every front. It can’t, and it shouldn’t. Instead, the country has embraced a niche strategy, focusing on areas where it can lead the world. Crucially, these are the parts of the value chain that create the most intellectual property and the highest margins. It is a strategy grounded in realism, but also one that demands urgency and coordination. 

Chip design has long been one of the UK’s most powerful assets. Arm remains the clearest example: its architectures, renowned for efficiency, sit inside billions of smartphones and increasingly inside data centres, cars, and the growing universe of IoT devices. Arm’s licensing model has allowed thousands of companies to innovate around British-designed cores, effectively making UK ingenuity foundational to global computing. Imagination Technologies stands beside it as another quiet giant. Its GPU IP powers everything from mobile gaming to automotive displays and emerging AI acceleration. These firms built global ecosystems not through manufacturing might but through ideas, and that is a strength the UK can amplify. 

Alongside design, the UK’s leadership in compound semiconductors is becoming increasingly significant. These materials, which outperform silicon in high-frequency communications, power electronics and photonics, are essential for technologies such as 5G infrastructure, electric vehicles and radar. In South Wales, the Compound Semiconductor Applications Catapult has turned focused R&D into industrial capability, creating a centre of gravity for companies building next-generation electronics. This is not research for its own sake; it is industrial strategy made tangible. 

The government has begun to recognise the strategic importance of this sector. Its £1bn National Semiconductor Strategy may be modest compared to the vast subsidies seen in the US and Asia, but its value lies in focus, not volume. Rather than chasing fabs at any cost, the UK is backing areas where it has a realistic chance of worldwide influence. The additional £500m commitment to quantum technology over the next four years shows similar intent. Quantum computing, sensing and communications will reshape everything from cybersecurity to national defence, and the UK aims to be among the nations defining that future. 

Yet strategy alone is not enough. Other countries are already competing fiercely to attract semiconductor investment.  Japan secured a major TSMC plant with a mix of subsidies, talent and predictability. Ireland has spent decades cultivating Intel’s European operationthrough a stable regulatory environment and a steady flow of engineers. The UK can learn from these approaches, but it does need to present a value proposition that is just as compelling. It must offer clarity, speed, and a business environment that rewards companies willing to innovate here. 

The greatest constraint, both for the UK and globally, is talent. Semiconductor engineering is now one of the most competitive labour markets in the world, and the UK faces the same challenge as every nation: too few people with the specialised skills that chip design, advanced manufacturing and materials science demand. Solving this will require a long-term shift. Universities will need more industry-aligned courses, and colleges must develop more pathways that connect students directly into semiconductor careers. Engineers working in aerospace, automotive, defence and software must be given opportunities to move into semiconductor roles through meaningful retraining programmes. And once the UK has this talent, it must become a place where they want to stay. Competitive salaries matter, but so does the promise of interesting work, modern facilities and a sense that the country is committed to leadership rather than merely participation. 

One of the UK’s most underrated advantages is its collaborative culture. Historically, the country has excelled when industry, academia and government work together towards a shared technological goal. The semiconductor sector is no different. The GCAP Electronics Evolution Consortium – bringing Leonardo and partners together to develop next-generation sensing technologies – shows the power of pooled expertise and shared infrastructure. The UK needs examples like this. Universities can provide the fundamental research that fuels breakthroughs; Catapults can accelerate translation; and industry can scale the results into real products. In semiconductors, no single organisation can succeed alone. The winners are ecosystems, not isolated champions. 

This matters because semiconductors are now inseparable from national sovereignty. They underpin artificial intelligence, telecommunications, defence systems, energy networks and the entire digital economy. A nation’s strength in semiconductors increasingly defines its economic and strategic independence. The UK already leads in design, intellectual property and compound materials. The task now is weaving these strengths into a coherent industrial base, one capable not only of producing world-class innovation but of attracting and retaining global partners aligned with the UK’s long-term ambitions. 

The opportunity is real. With the right focus, the UK could become one of the world’s leading hubs for advanced semiconductor design and next-generation materials. The next decade will determine which countries shape the future of computing and which merely buy it. The UK must decide where it wants to stand. 

To succeed, the UK must double down on its niche strengths, accelerate collaboration between academia and industry, strengthen its talent pipeline, and create an environment that gives global innovators a reason to build here. The UK will not outspend the US or out-subsidise the EU, but that should not be the ambition. Instead, it should lead in the parts of the value chain that define the direction of the industry, not just the volume of output. 

Quantum shows what this can look like. The UK has firmly established itself as a global leader in the field, ranking third worldwide for the quality and impact of its quantum research, and standing as one of the top two countries for creating and scaling quantum companies. It now hosts the largest number of quantum start-ups in Europe and attracts more investment into the sector than any other European country. This is proof that when the UK aligns world-class science, early commercialisation, and targeted support, it can shape frontier markets rather than chase them. 

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