Britain risks becoming ‘tech colony’ of US and China, Sunak warned

Rishi Sunak has been warned that Britain risks becoming a “tech colony” of China or the US without Government support for the domestic semiconductor industry.

Nigel Toon, chief executive of British chip company Graphcore, has written to Prime Minister Rishi Sunak, Chancellor Jeremy Hunt and Michelle Donelan, the Technology Secretary, urging them to commit to more funding for “home-grown” chip suppliers.

Mr Hunt promised to spend £900m on high-tech AI computers in the Budget and Mr Toon has urged the Chancellor to earmark a “large percentage” towards spending with British chip companies.

In his letter to ministers, Mr Toon wrote: “We are concerned that unless a significant portion of the budget is explicitly earmarked for UK-based suppliers, this funding commitment will quickly be consumed by digital giants like US-based chipmaker Nvidia.”

Without support for British AI computing, there was a “risk that we just become a tech colony… we just become dependent on the US or China for technology and our ability to produce it is carved out,” Mr Toon said.

“If we don’t do it now our ability to do something is going to run away from us.”

Microchip manufacturing has become an increasingly political issue as the devices become central to economic growth and tensions with China mount. The majority of semiconductors are manufactured in Asia, notably in Taiwan and China.

Last year US President Joe Biden announced the CHIPS Act, a push to boost US manufacturing and “counter China.”

Mr Toon said the US was already heavily subsidising its domestic semiconductor companies to develop advanced artificial intelligence technology.

He said: “There is a project for Intel, there is a project for AMD, there is a project for Nvidia-based kit. Hundreds of millions of dollars flow back to those three companies to effectively subsidise their roadmap.”

In the letter to ministers, seen by The Telegraph, Mr Toon warned: “We have not yet seen a signal that the British Government intends to include British-made technology in this country’s planned AI compute capability.

“By backing UK suppliers, the government not only develops a valuable AI compute ecosystem, but also nurtures future UK-based, highly skilled teams of engineers with the knowledge and confidence to build the next generation of digital hardware.

“This was the case with Arm, which has indirectly been responsible for a series of digital hardware start-ups in the UK, as Arm-trained engineers founded other businesses.”

The plea comes after a warning that Britain’s chip industry could be at risk. The Chinese-backed owner of Britain’s biggest microchip plant has claimed the facility will be forced to shut down if the Government successfully blocks its takeover.

Nexperia has been ordered to sell its stake in Newport Wafer Fab on national security grounds but claims the struggling factory will collapse without its support.

Founded in 2016 and based in Bristol, Graphcore develops semiconductor technology designed for artificial intelligence. Its “intelligence processing unit” is designed to outperform modern graphics processors at AI tasks.

The company was valued at $2.8bn at its last funding round and has raised money from BMW, Microsoft and Baillie Gifford.

Mr Toon's letter said the UK should maintain “technological diversity” between different types of processor and suppliers.

A Government spokesman said: “We are committed to supporting the UK's vitally important semiconductor industry.”