Why is the world investing so much in semiconductors?

Global investment in semiconductors is soaring due to their critical role in modern electronics.

Durham's latest chip plant, once a ceramic pipe factory, is transitioning into a state-of-the-art facility for chip production.

Pragmatic Semiconductor, the UK's top manufacturer, has already established a "fab line" here, with another two funded by a £182m investment from various sources, including government-backed initiatives. However, fulfilling their vision for eight production lines necessitates even greater capital.

Semiconductors are indispensable, found in everything from smartphones to appliances. Supply chain disruptions and geopolitical unrest, especially in Asia—home to 90% of advanced chip production—underscore their significance.

Amidst these challenges, Pragmatic is innovating with flexible semiconductors, targeting applications in wearable tech and logistics. Unlike traditional silicon chips, Pragmatic's flexible chips are cost-effective and quick to produce, potentially within 48 hours.

Despite these advancements, high-tech devices still depend on advanced silicon semiconductors, a fact highlighted by the severe shortage during 2021.

With the industry concentrated in Asia, notably Taiwan's TSMC, global powers are injecting vast sums into domestic chip production to reduce reliance. The US, EU, and UK have committed billions to the sector.

In response to government incentives, big players are expanding production. For example, Germany is witnessing major investments, including a €10bn initiative in Dresden.

This push is echoed across Belgium, Lithuania, and the Czech Republic. In the US, the Chips Act has sparked a surge in funding applications for new plants in multiple states.

Efforts extend beyond the West, with India, a nation with a strong chip design history, advancing manufacturing ambitions. Given geopolitical tensions, especially with China, countries like the US are deepening tech ties with India.

However, constructing chip facilities presents obstacles, such as TSMC's struggles with skilled labor shortages in Arizona. Moreover, there's a concern that new plants in Europe and the US might just replicate Asia's existing infrastructure, potentially leading to industry oversaturation.

Nonetheless, Pragmatic's CEO David Moore anticipates increased diversification in semiconductor use and manufacturing. With a growing need for semiconductors across billions of devices, the challenge lies in supplying high volumes cost-effectively.