Effective communication with government and other stakeholders
Discussions with government officials and leaders of other bodies should avoid detailing core technologies and focus on tangible benefits of a flourishing compound semiconductor industry.
BY HOWARD RUPPRECHT FROM CSCONNECTED
Semiconductors are ubiquitous and largely invisible. As the little black boxes attached to circuit boards, we are all utterly reliant on their functionality for virtually everything we do – yet we take their easy availability and low cost for granted.
During the pandemic, when semiconductor shortages thwarted car sales, the importance of these chips – and our dependence on them – finally started to resonate among policymakers. Geopolitics (particularly between China, the US and Taiwan) further escalated supply chain risks, prompting calls for ‘re-shoring’, supported by huge subsidies.
But it’s far from easy to construct sovereign supply chains. Semiconductor design and manufacturing is an exclusive club, only a few countries are members, and none of them enjoys full independence or capabilities to make the latest semiconductors.
Like many countries involved in our industry, to ensure that the UK maintains its membership, some level of governmental support is needed to continue to develop unique sovereign capabilities, which are traded with allies. But for those with leadership roles in semiconductor companies and associated bodies in the UK – and those holding similar positions in other countries – what’s the key to successfully communicating our industry needs to national and regional policymakers, and justifying these investments to the nation at large, including the taxpayers?
It’s fair to say that politicians and civil servants are unlikely to read Compound Semiconductor magazine, so it’s essential to use different channels. In our case, at CSconnected, we are working with a wide range of non-industrial stakeholders, from local politicians that have semiconductor facilities within their constituencies, to national government departments whose role is to deploy funding for growth. From holding local events, to managing an All-Party-Parliamentary-Group, we strive to avoid explaining technicalities, focusing instead on increasing awareness and understanding industry dynamics, and the subsequent economic benefits that a thriving CS industry can deliver.
I don’t need to tell you that semiconductors are not a commodity, and must be viewed markedly differently from the likes of oil and steel. Our sector produces highly differentiated individual components, with the market for them skewed by massive national and regional intervention, to support local industry. It is crucial to drive home the point that these are not ‘subsidies for a failing industry’, but are a price that’s well worth paying to maintain a strategically important leadership position in a global industry. One should view support for the semiconductor industry as more akin to regularly watering an orchard. If it stops, trees will ultimately yield less fruit and eventually die. Sometimes nature supplies the necessary rain, and sometimes we need to irrigate to ensure long-term sustainability.
Publicly funded support tends to takes the form of R&D funding, generally leveraged by both public and private equity. In an industry spending around 16 percent of its revenue on R&D, it is essential to continually innovate, as this type of work creates and sustains many highly paid knowledge-intensive positions. Equally, it’s important to support the building of research and scale-up facilities with leading-edge equipment, to create an open access environment where deep-tech companies can develop the future. In south Wales, we are succeeding on this front with the Centre for Integrative Semiconductor Materials, at Swansea University. It’s essential to explain to local stakeholders how these investments support long-term job creation, enable leverage for further investment, facilitate entrepreneurship and drive industrial scale-up.
In our locality, the compound semiconductor cluster works with the Welsh Economic Research Unit at Cardiff University to independently track the economic impact of local investment. Since 2020, employment has grown by 32 percent within the cluster, gross valued-added contribution is more than three times that of the national average, and we are proud to export over 90 percent of the collective £500 million in annual revenue from cluster companies. Ultimately, it’s these numbers that resonate with our stakeholders and benefactors when justifying investment.
For us, the biggest challenge is associated with the public sector answering to a different group of stakeholders. Probably including some democratically elected decision makers, this group is made up of individuals that have their own vested interests, whether at a local constituency or ministerial portfolio level. As there are many competing sectoral and geographical investments on the table, this group will inherently struggle to focus, as doing so will threaten accusations of excluding worthwhile ventures. The result is that public money tends to be spread thinly across numerous causes, rather than being effectively focused.
Decision making can also be painfully slow, requiring independent evidence and adherence to onerous public procurement rules. This drawn-out process results in long cycles of investment and subsequent impact that often transcends political terms, bringing a risk of jeopardy from a changing strategy if the political incumbent changes. Against this backdrop, it’s not uncommon for former policy makers to fail to see the results of their decisions until after their term in office.
Some of what I’m describing is common across western democracies. This is why we are unlikely to see the kind of focus evident in Tawain, South Korea or China, where there are closer industrial links to long-term policy and government support. This is unfortunately a disadvantage in such a fast-moving global market. Private companies are essentially autocratic and have the freedom to make fast, bold decisions on investment and strategy (within the bounds of applicable law) without having to seek approval beyond major shareholders.
Given the different perspectives that exist, what’s needed to effectively work with government?
Our experience shows that working as a group has stronger impact and is more efficient for all parties. So, if a delegation is visiting our cluster, we collectively mobilize. A single voice representing a large group with common needs is more effective.
In addition, we devote much effort to building long-term relationships with the government and its officials. Like any relationship, we have good and bad times, but we all need to collaborate. We must accept that there will be a turnover of people, so a level of mutual re-education will be periodically required, and relationships must exist at many levels.
Finally, it’s important to find common ground. Some things are easier for government to do than others. For instance, an investment in skills development has a wide impact on the community, while still supporting the development of essential resources needed for cluster growth. Equally, there may be a preference for interventions that leverage large amounts of private equity.
What’s clear is that the future success of the UK’s semiconductor industry will depend in part on successful collaboration between industry and public stakeholders – and we will endeavour to keep these relationships active and constructive.
