A British microchip master aims to raise £100m as it plans to move out of the UK

Pragmatic Semiconductor seeks new investment in UK chip strategy

Aug 7, 2023 - 14:57
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A British microchip master aims to raise £100m as it plans to move out of the UK

A taxpayer-backed microchip champion is launching a £100m fundraising campaign to expand in the US after Britain was warned about support for the sector.

Pragmatic Semiconductor, which launched a US subsidiary in February, is looking for new investment as it looks to build facilities across the Atlantic.

Company founder Scott White said: “We can put our manufacturing capability anywhere and as a British company we want to do it in the UK.

"But it depends to some extent on [the government's semiconductor] strategy getting the right initiatives in place to give us the support we need to do that and expand effectively in the UK."

Founded in 2010, Pragmatic produces cheap and flexible microchips that can be used in packaging and clothing, for example.

Mr. White described Pragmatic's US expansion as an "obvious" choice "both because of the existing customer base, the size of the market and the incentives of the CHIPS Act."

US officials are doling out billions of dollars in subsidies under Joe Biden's $280bn (£217bn) CHIPS Act to persuade global chipmakers to move operations to the US.

British ministers have pledged £1 billion to the semiconductor industry over the next decade. One industry boss called the move "quiet" when the 10-year plan was unveiled in May.

Pragmatic's fundraising, first reported by The Telegraph earlier this year, is seeking more than £100m to help the company expand into the US.

"We're not going to raise it 10 times, but we're going to get more than this round," White said. Investment bank Lazard advises it would almost double the £148m the microchip engineering firm has raised since it was founded in 2010. Current backers of the Cambridge-based company include the National Security Strategic Investment Fund, British chip maker Behemoth Arm and the CIA's In-Q-Tel investment unit.

It comes after the founder of Pragmatic was appointed to the government's microchip strategy advisory group last week.

The Semiconductor Advisory Panel was formed almost two months after ministers promised to launch the body at London Tech Week in June.

Industry sources have expressed confusion as to why the panel, chaired by trade minister Paul Scully, has taken so long to form.

Chip director Simon Thomas, who called the semiconductor strategy "steamy" in May, said: "Although this is a month and a half later than the government promised, we stand ready to support the panel so that they can provide a much-needed strong voice to represent the an entire industry."

Thomas' company, Paragraph, is the second British semiconductor company ready to make the leap to the US, applying for similar CHIPS Act grants in May.

Pragmatic is the latest microchip maker to emerge from the UK. In July, Arm CEO Rene Haas said the company would be listed on Wall Street after Rishi Sunak tried to list it on the London Stock Exchange. The UK's chip strategy aims to focus on the UK's traditional strengths in chip design and development, rather than manufacturing.

Countries like Taiwan and South Korea dominate the global silicon chip manufacturing sector. Ministers hope to promote other success stories such as Cambridge firm Arm, whose chip design is now used in around 90 per cent of modern smartphones.

The US push for land-based chips is based on geopolitical fears about Taiwan's future as an increasingly assertive China conducts ever-larger military exercises near the island.

China's leaders do not accept that Taiwan is an independent nation-state, but consider it a breakaway province to be submitted back to the mainland.

A government spokesman said: “Our targeted strategy doubles down on UK strengths to strengthen our leadership role in an integrated global market without having to enter an expensive grant competition.

"As we have said, we will announce plans before the autumn to support investment in the semiconductor manufacturing sector, particularly where it is vital to the UK's technology ecosystem or national security."

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