The decision over Newport Wafer Fab provokes conflicting responses, and not just from the opposing camps but within concerned individuals. Policy Exchange has recently published two papers related to the matter, Geoffrey Owen’s Semiconductors in the UK: Searching for a Strategy, and Edward Stringer’s Affording the Integrated Review. Policy Exchange has long championed a more strategic approach to dealing with the challenge posed by China’s rapid economic and military expansion, made more necessary in the last five years by Xi Jinping’s overt turn to autocracy and China’s increasing bellicosity in the international arena.
It might be assumed, therefore, that Policy Exchange would unequivocally welcome Grant Shapps’ decision, finally taken after three business secretaries and two National Security Advisors had equivocated over at least 6 months. Owen points out, however, in his more commercially orientated piece, that NWF does not produce cutting edge technology chips, though what it does produces a semiconductor plant remains important to the sub-componentry of almost all modern industrial products. He notes, too, that free trade is almost always an engine of growth and should not be interrupted hastily. It does not take may interventions to erode investors confidence. This is an important consideration given the economic analysis presented yesterday by Jeremy Hunt.
My piece is oriented around the core geostrategic considerations of the Integrated Review and its Indo-Pacific Tilt (itself a subject of a previous Policy Exchange report). I argue that the Ukraine war has revealed much, not least that China poses a much greater residual threat than Russia, and that semi-conducter production is proving as vital a war-winning capacity as was ammunition and oil previously. It is now well-known that the bulk of the World’s semiconductors are made in fabrication plants in Taiwan, and so China’s increasingly threatening posture towards the island should worry us all. A first-order reading of this situation might lead one to welcome any attempt to shore up any element of our sovereign fabrication capacity.
While the Government’s taking the matter seriously is welcomed, and demonstrates a renewed sense of overall strategic thinking guiding previously siloed decisions, there remain many questions to be answered. Is this the first or last of such decisions? Why is NWF uniquely valuable? Which other related capacities are now considered critical? These give rise to broader, genuinely strategic questions: To what extent does the UK need a sovereign semi-conductor manufacturing base, is that feasible, and if not can adequate security be realised through ‘friend-shoring’ such capacities? So what, in short, is the national strategy for encouraging the sovereign semi-conductor sector? The very question posed by Owen back in June. As I noted, both the US and EU have moved more quickly than the UK on these questions and have allocated resources accordingly. An even broader question, but one that will greatly affect inward investment, is what is the government’s policy on critical sovereign industrial capacities beyond semi-conductors?
I also judged that the National Security Investment Act is necessary but is a blunt instrument if wielded without an associated policy or strategy to guide its implementation. Now the government has wielded it, it would be extremely useful if it laid its associated policies so that interested parties might assess when and where it might be applied again.