01-09-2023 | By Robin Mitchell
Recently, the UK Government announced that it is currently looking to negotiate with Taiwan to create a trade partnership that will see the high-tech industry thrive. What challenges does the UK face with regards to high-tech development, what conversations have been had between the UK and Taiwan, and why would such a deal not see foundries in the UK anytime soon?
What challenges does the UK face with regard to high-tech development?
If the past few years have taught us anything, it’s that modern technology is the backbone of modern society and, without it, would send us back almost a whole century. Whether it is traffic control, energy distribution, medical sciences, or even agriculture, technology plays an essential role in every aspect of daily life, and it is for this reason that the high-tech industry provides immense value in economic growth and job opportunities.
However, developing new technologies is no small feat and is highly dependent on a wide range of different skill sets. For example, an engineer developing a new robotic arm can do so entirely in CAD, but unless it can be physically manufactured by skilled labourers, such a design will never be realised in the physical world. In order for skilled labour to manufacture the robotic arm, all kinds of high-tech components need to be manufactured, such as stepper motors, semiconductors, and power controllers. Again, this requires numerous other industries, which themselves depend on others.
As a result, it is virtually impossible for one country to do everything in-house. Even countries such as China, which have access to both manpower and raw minerals, still need other countries to develop critical technologies, such as Taiwan for semiconductors and the US for software.
This dependency on other nations is especially true for the UK after it moved away from manufacturing in favour of services. A classic example of this would be ARM, one of the world’s biggest suppliers of CPU cores for microcontrollers and microprocessors. ARM itself doesn’t manufacture anything at all and instead designs cores in software for other companies to license. As such, the UK is able to design processors, but it takes other companies (such as STM, Apple, and Microchip) to physically manufacture them for use in products that are eventually consumed in the UK.
Thus, it is clear that one major challenge currently facing the UK when developing anything high-tech is the overreliance on other nations. Whether it is tariffs, trade wars, or outright conflicts, every barrier that sits between a developer and their end goal makes development increasingly difficult. Additionally, the large distances between nations also incur increased times for shipment and deployment, something which can significantly increase R&D times.
Overreliance on International Collaboration and Resources
For example, PCB manufacturing is a service that can very easily be done locally in the UK, and there are options available to engineers. However, for small start-ups and those on a budget, these services can be extraordinarily expensive, especially when compared to those offered by China. Thus, instead of funding local manufacturers (who could then develop their own tech), engineers have little choice but to use other countries for services that could otherwise be done in the UK.
Another challenge faced by the UK’s high-tech industry is that it is limited in what it can offer as a result of skill shortages. Simply put, the lack of wafer fab facilities and other key manufacturing technologies used in electronics means that the UK has little incentive to teach subjects such as semiconductor manufacturing and its associated technologies, favouring over IP-based technologies and software.
Those who do want to pursue a career in semiconductors after leaving university would have better luck emigrating to a nation that supports such manufacturing, including the US, Europe, Korea, and Taiwan. Just like how many NHS workers are now leaving the UK for Australia due to better opportunities and pay, those with high-tech skills are being presented with better opportunities elsewhere.
Overall, the lack of support for high-tech companies and manufacturing technologies hinders the UK’s ability to remain competitive beyond the markets that it already dominates, essentially pigeonholing the engineers that it produces.
UK and Taiwan to discuss potential trade relationship
Recognising the need to help develop the UK tech industry, the UK government recently announced that it is planning to negotiate with Taiwan on a future trade relationship. While talks are still yet to take place, the initial groundwork has already started and hopes to yield results in the coming years.
The proposed "Enhanced Trade Partnership" (ETP) between the UK and Taiwan is a testament to the UK's ambition to deepen its ties in the high-tech sector. A spokesperson from the British Department for Business and Trade emphasised the longstanding trade and investment relationship between the two nations. The ETP aims not only to strengthen this bond but also to explore growing opportunities for British businesses in the realm of digital and clean energy.
Trade Dynamics and Mutual Benefits
According to a report from the Overseas Community Affairs Council, Taiwan's trade with the UK has shown a consistent upward trend, emphasising the importance of this partnership for both nations.
According to the UK government, trade with Taiwan has been steadily increasing since 2013, with a current bilateral trade amount of $8.6bn. Furthermore, it was also stated that Taiwan accounts for 0.5% of all UK trade, which seems small until you consider that Taiwan is a small nation with an enormous high-tech presence (such as TSMC).
Bilateral trade dynamics further highlight the significance of this partnership. Since 2013, there has been a consistent upward trend in trade between the UK and Taiwan, culminating in a bilateral trade amount of 8.6 billion pounds last year. Interestingly, while Taiwan accounts for only 0.5% of the UK's total trade, it stands as the UK's 32nd largest trading partner. In the Asian context, Taiwan ranks impressively as the UK's 10th-largest trading ally.
The announcement also stated how the trade relationship will look to improve green technologies, provide business growth, and see bilateral investments to help both nations.
The UK's efforts to strengthen trade ties with Taiwan have been evident, with recent visits and discussions aiming to bolster the relationship. As highlighted by the UK government, there's a mutual interest in enhancing cooperation in high-tech sectors, including digital and clean energy.
“The UK and Taiwan share deep trade and investment ties, and our Enhanced Trade Partnership will deepen engagement and take advantage of growing opportunities for British businesses. Our ambition is to increase trade cooperation in high-tech sectors such as digital and clean energy, and we will engage with businesses on how we can achieve this together soon,” – UK Government.
The UK's focus on high-tech sectors is further exemplified by its national semiconductor strategy, launched in May 2023. This strategy introduced a dedicated agency under the Department for Business and Trade, specifically to bolster the international expansion of UK companies in pivotal technology sectors, with semiconductors being a prime focus. Furthermore, the UK's Digital Trade Network for Asia Pacific initiative has identified Taiwan as a key market, aiming to enhance the outreach of British digital firms in the region and foster stronger connections with international clientele.
Why would such a deal not see foundries in the UK?
No matter how good of a deal the UK government gets with Taiwan, there is virtually no chance that it would result in new foundries producing high-tech semiconductors. The reason for this simply comes down to the inability of the UK to support such industries, with little skilled labour capable of running such an operation and few spaces to build a facility (keep in mind that these facilities can be extremely damaging to local environments).
Instead, it is more likely that Taiwan and the UK will work on developing software tools for the semiconductor industry, IP cores for embedded systems, and other numerous semiconductor IP technologies. AI may also be another technology that sees substantial benefit from any trade deal, with Taiwan helping to develop new AI hardware platforms while UK researchers develop new algorithms and engines to run complex neural networks.
Overall, this trade deal between the UK and Taiwan will undoubtedly be helpful to the UK, but it certainly won’t bring with it new foundries and manufacturing services. Instead, it will help secure the UK’s position in the industries that it does dominate, such as semiconductor IP and software.
It's crucial to understand Taiwan's pivotal role in the global semiconductor market. Taiwan, home to TSMC, the world's largest semiconductor foundry, has been at the forefront of advanced semiconductor manufacturing. The UK's intent to deepen ties with Taiwan is not just about trade numbers but tapping into this technological prowess. Collaborating with a nation that's a linchpin in the global semiconductor supply chain can provide the UK with invaluable insights and opportunities in the high-tech sector.
While the UK has shown interest in semiconductor technologies, as evidenced by the UK delegation's visit to Taiwan's semiconductor industry, the challenges of establishing foundries in the UK remain significant.