UK chip strategy needs a AI acceleration slant.

In a 12-page report prepared for the government, the Council for Science and Technology has acknowledged that Labour’s plan for artificial intelligence opportunities (AI) lacks any concrete support for semi-conductors.

Labour’s industrial strategy was unveiled in June. It included PS19m funding for a UK semiconductor center that will act as a single contact point for global firms and government to engage with the UK sector. The Department for Science, Innovation and Technology said that the centre would help ambitious companies scale up, create new partnerships and strengthen Britain’s role in the global supply chains – helping to grow the UK economy.

While the UK is building a viable semiconductor industry, the world moves at an incredible rate due to the growth in AI and the demand for AI acceleration chip. The CST believes that the UK must develop a workforce for chip designers, particularly in the field of optoelectronics. It predicts that this will be necessary to provide high-speed interconnects to enable the connection of large numbers graphics processing units (GPUs), to support advances in AI inference and Training

AI chip growth is expected to be the fastest growing area of the chip industry in the next decade. The authors of the Council for Science and Technology report Advice for building a sovereign AI-chip design industry in the UK. Analysis noted that there were disproportionate opportunities for companies – and nations – with the right capabilities. Six of the seven largest corporations in the world invest billions in areas where they believe the low-hanging fruits are for more efficient, quicker, lower-power AI chips.

A 50-point AI plan of action by the government includes the establishment of AI growth zones. The CST’s report states that “the plan does not mention UK-designed AI chips despite the opportunities and risks”.

Although there are disproportionate benefits, the UK should consider the possibility of a stake in AI chip technology, which would “also help secure our hardware supply chains for domestic commercial and military applications, in a uncertain era of export restrictions and tariffs”.

It is more important than ever to consider this, given recent policy shifts in the US and the risk that US technology could be used as a bargaining chip by US trade negotiators to exert pressure on their trading partners.

In August, Associated Press reported Nvidia and AMD agreed to share 15 percent of their revenue from chip sales in China with the US Government as part of a contract to secure export licenses for semiconductors.

Some observers of the industry have noted that this sets a very dangerous precedent. Chatham House warns that the Trump administration is using the levy to exert pressure on some countries. While the US administration has argued for restricting the export of high-end semi-conductors to China on the grounds of national safety, the Trump administration’s levy represents a means to exert pressure on those countries.

The deal sets an alarming precedent that will have long-term implications. It could mean that in the future, other companies in strategic industries, including those with key US national concerns, will be able to pay their way out from burdensome and complicated export control regimes.

She warned this type of arrangement could also be the setting for the Trump Administration to more widely exercise its ability to regulate export licensing in order to influence companies whose supplies chains involve the US such as the high tech sector.