The UK is in a uniquely promising position, far too little understood, to play a lucrative role in the coming era of artificial intelligence – but only if it also grabs the opportunity to start making millions of computer chips.
AI requires vast numbers of chips and we could supply up to 5% of world demand if we get our national act together.
Our legacy in chip design is world-class, starting with the first general-purpose electronic computer, the first electronic memory and the first parallel computer. Today we have Cambridge-based Arm, a quiet titan designing more than 90% of the chips powering phones and tablets globally.
With such a pedigree, it is not idle daydreaming for British companies to win a significant chunk of the AI chip market; 5% is a conservative, achievable ambition. World-class universities, a thriving foundational AI company in DeepMind, and a robust ecosystem for innovation give the UK the practical tools it needs to compete.
The rewards of success are staggering. By 2033, the global AI chip market is projected to reach $700bn (£620bn) a year, outstripping the whole of today’s semiconductor market. Capturing that 5% means $35bn in new revenue and thousands of high-paying jobs.
AI will reshape not only our economy but also our society and its security. Yet so many misunderstand where its true value and strategic power lie.
In today’s gold rush, the real fortunes belong to those who build the shovel, not just those digging for digital gold. I saw this first-hand when I was on the Intel board in California between 1997 and 2006 as Gordon Moore and Andy Grove built that company. They built the “back end” of tech’s first revolution just as Nvidia is building the much bigger “back end” now.
British engineers, British brains, British business and British investors are world-class at this stuff. But we will need the government to get on board.
Consumer eyes are dazzled by OpenAI’s generative marvels. But it really is Nvidia, the company that supplies the advanced chips that make such feats possible, that reaps the market’s largest rewards. OpenAI looks as if it’s worth only a 10th of Nvidia. AMD, a semiconductor company that designs chips, is a distant second, while startups such as Cerebras and Tenstorrent jostle for a small piece of the pie.
Every AI model and application, from autonomous robots to real-time translation tools, depends on advances in chip technology. Chips are the new oil in the digital economy, determining how quickly and efficiently future applications come to life. At present, the only truly profitable giants in the AI sector are chipmakers.
Some fear that China will commoditise AI chips just as it did with solar technology, causing prices to crater and incumbents to fall. The reality is more nuanced. US export controls prevent China from accessing the world’s advanced chip manufacturing technology for the next decade, severely limiting the country’s capacity to dominate high-end AI chip markets. For now, this leaves the US as the key player, with strong opportunities for Britain as its closest ally adept at chip design.
The UK has already generated a few companies such as Fractile, Flux and Oriole working in this area. But we lack the scale to match the opportunity. We should not compete with Nvidia for the compute power of datacentres but in specialised applications that break new ground: robotics, factory automation, medical devices and autonomous vehicles.
These sectors offer open terrain for innovative architectures and fresh competition.
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Too often, UK industrial strategy is hobbled by national trepidation and lack of confidence. This must change. First the government must strongly promote our determination to compete in AI chips.
Second, within a decade we must double our chip design workforce from today’s 12,000, providing incentives for more talented students to study electrical engineering and computer science with generous bursaries. A target of 1,500 new students a year is realistic. Universities must offer the courses and the government must step up with practical financial support.
Third, the UK must use its investment levers: sovereign AI funds, the British Business Bank, the National Wealth Fund and the mandate to “buy British” by the Ministry of Defence.
Fourth, the UK’s strategic relationship with the US must be a platform for deep integration with leading US chip manufacturers and access to their advanced sub-3 nanometer fabrication technology. Building robust supply chains and innovation pipelines with US partners is indispensable.
If the UK leans in fully, the new age of AI may be written not just in code, but in silicon, bearing a very British imprint.
