Key Takeaways
- The U.K.’s Ministry of Defence (MoD) plans to upgrade a semiconductor manufacturing facility.
- The ministry bought the Octric foundry in 2024 to secure a domestic supply of critical chips.
- An escalating trade war could further disrupt semiconductor supply chains.
The U.K.’s Ministry of Defence is preparing to invest £200 million to upgrade a semiconductor manufacturing facility it acquired from Coherent in 2024.
The Ministry initially bought Octric Semiconductors to secure a domestic supply of chips for the defense sector.
Now, a rapidly escalating global trade war has added new urgency to the government’s efforts to shore up domestic semiconductor manufacturing.
Government Invests in Nationalized Chipmaker
Originally built by Fujitsu in 1991, Octric’s County Durham semiconductor foundry was once one of the world’s most advanced.
But by 2024, the future of the plant looked uncertain after Apple pulled out of a contract to manufacture iPhone components there.
The Ministry of Defence acquired the facility in September—the only one in the U.K. capable of manufacturing gallium arsenide semiconductors—for £20 million.
Defense Secretary John Healey justified the purchase on national security grounds, arguing that the U.K. needed to protect supply chains that are crucial to the armed forces.
The latest investment reported by the Telegraph will bring the government’s total spending to £200 million. The new funding is expected to boost Octric’s finances and ensure the foundry’s continued operation.
Semiconductor Supply Chains and National Security
In recent years, the vulnerability of semiconductor supply chains has emerged as a key national security concern for many countries.
Facing the reality that South Korea and Taiwan produce the vast majority of all semiconductors, like other countries, the U.K. has scrambled to protect its last remaining chip makers.
Octric is considered especially critical as its chips are used in military systems, including radar and fighter jets.
Mirroring the U.S. CHIPS Act, the government’s national semiconductor strategy allocated a billion dollars to boost domestic protection and improve supply chain resilience.
However, just as things were starting to look up for the British chip industry, rising trade barriers could derail any progress.
The Impact of Tariffs
Although the U.S. government exempted semiconductors from its latest round of tariffs, this will provide little respite for businesses that are used to unrestricted international supply chains.
Most of the chips that are imported to the U.S. are already incorporated into manufactured electronics, including computers, phones and the advanced GPU servers used in AI data centers.
Import duties between 10% and 54% could cause extreme disruption to hardware supply chains.
Although Donald Trump has touted recent investments in U.S. foundries as evidence that tariffs work, reshoring production will take years, be extremely costly, and may still be unable to mitigate the cost of tariffs.
Consider Nvidia’s Blackwell GPUs, for example.
Taiwan Semiconductor Manufacturing Company (TSMC) is reportedly preparing to relocate production to Arizona. But even then, it will likely have to ship components back to Taiwan for packaging, the final step of the process of assembling the complete GPUs.
Things are even more complicated for electronics manufacturers like Dell, which produces server racks consisting of multiple Nvidia cards and other components.
With suppliers in a dozen countries, any single Dell product may cross multiple international borders before final assembly and could incur double or triple taxation if other countries impose retaliatory tariffs.
James Morales is CCN’s blockchain and crypto policy reporter. He has been working in the news media since 2020, writing about topics such as payments, banking and financial technology. These days, he likes to explore the latest blockchain innovations and the evolving landscape of global crypto regulation.
With an educational background in social anthropology and media studies, James uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.
