The UK government has acquired a semiconductor factory in Newton Aycliffe, County Durham, in a move to strengthen the defence supply chain and support the Armed Forces.
This facility is the only secure site in the UK capable of manufacturing gallium arsenide semiconductors, a vital component in military platforms such as fighter jets.
Defence Secretary John Healey visited the site, which was previously owned by Coherent Inc. and will now be known as Octric Semiconductors UK. The acquisition is expected to secure up to 100 skilled jobs in the North East and safeguard a critical part of the UK’s defence infrastructure.
“Semiconductors are at the forefront of the technology we rely upon today, and will be crucial in securing our military’s capabilities for tomorrow.
This acquisition is a clear signal that our government will back British defence production. We’ll protect and grow our UK Defence supply chain, supporting North East jobs, safeguarding crucial tech for our Armed Forces and boosting our national security.”
Semiconductors are an essential component of modern electronics, from phones and computers to military applications. The government has stated that this acquisition will enhance the UK’s defence capabilities and increase its industrial capacity, with plans to invest further in the facility over the coming years.
The acquisition comes ahead of an Investment Summit aimed at strengthening the UK’s trading relations and supporting high-quality jobs at home.
With global semiconductor demand rising, this move positions the UK to meet future technological needs, including advancements in artificial intelligence, quantum technologies, and 6G.
Background
In 2023, Coherent, the former owner of the Newton Aycliffe semiconductor facility, announced plans to cut over 100 jobs due to a drop in business demand, leaving the future of the site in doubt. With the facility’s long history of ownership changes since it first opened in 1991, there were growing concerns about whether it could continue producing the crucial semiconductor components needed for industries like defence and aerospace.
The recent government acquisition is a key move to secure the future of this vital facility. By stepping in, the government is protecting jobs and ensuring the production of important semiconductors used in military applications, such as boosting fighter jet capabilities. This not only stabilises the plant after last year’s uncertainty but also strengthens the UK’s ability to maintain control over critical technology in the defence sector.
Good news. With recruitment of experienced and qualified management team the company Should do well.
Bad news, we are using the defence budget to buy failing companies on the grounds of “national security”
That’s a very slippery slope.
I’d tend to partly agree.
On the other hand we appear to have woken up to a ‘global supply chain’ particularly for munitions not being a very good idea!
But I agree that if we buy every failing business we create the 1970’s money pit all over again.
It’s not ‘every’ though is it, indeed it’s so far one. I would have been happy if they had bought Sheffield Forgemasters too tbh as it’s the only provider of many vital steel products for defence and have recently developed welding techniques that greatly speed up and reduce costs for Nuclear reactor vessels. I presume RR amongst others will be happy about that. Oh and on that point should we have let RR go to hell in a bucket back in the day? The French on the other hand saved Renault from a similar fate and unlike the ill fated… Read more »
Hi Spyinthesky,
Actually MoD does own Sheffield Forgemasters, just search “who owns Sheffield Forgemasters”. Apparently they were acquired back in 2021.
As far as I can tell MoD seems to have a canny investment advisor squirreled somewhere in a backroom.
Cheers CR
They bought it for £2 million and now it has to have £400 million invested. Fingers crossed it works out and the work Forge Masters does is vital but that’s £400 million that could have be spent on ammunition and kit.
The Chinese military spends a lot of time investing in industries. Everything from airlines to luxury hotels and apartment blocks. It’s spends most of it’s time and resources doing this instead of training fight. It’s not a model I think we should emulate.
Does Britain struggle to compete in economic terms? Who are we struggling against? Japan has been in recession for two decades, Germany had a decent run over the past 10 years but its now looking at the kind of structural problems we had in the 70’s. Apparently America is doing well as its debt to GDP ratio passes Italy Canada slowing deflating away as its population heads to the US, Italy is on the verge if ceasing to be an advanced industrial economy and then there’s France. The IMF has the UK pegged as the second fastest growing economy in… Read more »
Yep the first line of the article says it all.We need to be very careful regards the availability of this sort of kit.
Just need to look at steel production now.
The fourth pillar of defence is the economic and industrial base of a nation, which we are historically very poor at understanding and protecting. It didn’t matter quite so much when our economy was comparatively large and our military footprint matched it but it does now. A good example of what happens when this not fully understood by politicians was the production of heavy calibre guns for battleships post WW1 and armour plate. The two businesses that produced these weapons amalgamated because of a lack of orders and when in the 1930’s we need an uptick it was not possible… Read more »
Well said, one might have thought that the lessons of history let alone simple logic might have made that obvious but I fear not. What a lovely future sight to see Tempests stuck on the ground because they don’t have the chips installed to make them functional. The Russians might have the last laugh there. Geez even the Americans were shitting themselves when Apple originally bought the chip company to produce their A-series chips because that company happened to produce the most advanced micro processors for their ICBMs. Indeed they would never have accepted those Arm based chips ever being… Read more »
Politicians prefer to pretend that there’s a ‘Peace Dividend’, which would negate the need for such concerns if it could be guaranteed to endure indefinitely. They then try to pretend that said ‘Dividend’ still exists when it doesn’t, because otherwise the realities of national security require them to spend money on things other than their pet projects or bribes for the electorate.
So you want to run a permanent war time economy like North Korea then? 40% of GDP to the military?
You want to start adding up how many chips are inside a tempest and how many suppliers they come from?
This is one small factory, do you really think it’s making a significant number of chips as a percentage of something as complicated as a modern aircraft.
A standard chip fab cost $20 billion to build and has to knock out hundreds of millions of chips to be viable.
Just my standard car has 1500 different chips in it.
It’s a fallacy to think we or anyone else can control modern supply chains.
👍Exactly!
Actually we are very good at this, the RAF and the RN have gone out of their way for centuries (RN) to do preserve and grow the industrial base.
The army is shit at this and always has been.
A few points to consider The 1957 Duncan Sandys Defence White Paper almost destroyed the U.K.’s aerospace industry. When the U.K. seriously tried to rearm in the 1950s we did not have the economic or industrial base to renew our conventional forces whilst developing our independent nuclear deterrent. We had to have the US assist us with the Astute programme because we had lost so much expertise from the end of the last nuke builds in the 1990s and the new boats. The U.K. now hasn’t got the capacity or enough skills to build a Fleet Solid Support Ship without… Read more »
Given the importance of GaAs tech to several future military projects, including Tempest I think it is a wise move .
There are several technologies this country needs to have control of.
It probably is but spending our slim defence budget on nationalisation of defence companies should be a last resort and it should be temporary. Companies like BAE and RR can develop sensitive technologies with no government subsidy and the use of a single golden share is more than sufficient for control.
I disagree. Managed properly and given the increasing use of GaAs tech, due to not least its speed and power consumption compared to Silicon , it very probably will pay for itself in the medium to long term.
Well that is perhaps an argument over where the money should come from. however to have no capability to produce these hi tech components would short sightedly leave us in a potentially crippled state to defend ourselves without others control over it or even military exports, which would be beyond short sighted in the present environment let alone future unknowns. I note you said previously that Ai and hypersonics were gimmicks, sorry but these comments sound so 1st WW cavalry officer stuff that doesn’t seem to fit with much of your otherwise sensible views on matters, so it really confuses… Read more »
Do we actually know where the money is coming from? Jim said ‘we are using the defence budget to buy failing companies on the grounds of “national security”’ but I see 2 things in this article, the report that the government is buying a company and an awful lot of mentions of defence applications of that company’s products. While the funds for this acquisition might be coming from the defence budget I don’t see that explicitly stated in this article and, unless other reporting is definitively stating that the defence budget is the source of the funding, then I think… Read more »
If you search “who owns Sheffield Forgemasters” the page comes up with MoD all over it so I think it is fair to assume that the MoD has paid for these companies. However, I would hope that the MoD benefits from any dividends payable…
Cheers CR
Straight into the Treasury coffers, do not pass go.
It can be counted as defence expenditure under NATO rules and out budget is right on the NATO floor so even if it comes from another department it will be counted against our defence spending just as with Ukraine aid and the MOD budget will be changed accordingly.
It’s not really a fair comparison in that semi conductors are so expensive to build at scale and so ubiquitous in every product that not even the USA has the capability for internalisation of the supply chain. Maybe at a NATO + level adding in the likes of Japan and South Korea we can do this and if this factory is part of an overall plan like that then it’s worth it but on its own it’s not doing anything. Big questions like why did it go bust and what does no one else suitable want to buy it are… Read more »
Maybe we should ask the Chinese,they like to buy semi-conductors..maybe they know something we don’t.
It would save em invading Tiawan I suppose
The US internalisation has started with the Chips Act which led TSMC and Intel to build state of the art fabrication plants within the continental USA.
The semiconductor eco system is deep and complex but the gravitational effect of multiple new builds is big and sucks in a lot, especially when USA had many chip fans before.
So it might not achieve a sovereign capability for all situations but it will make a big difference and encourage TSMC not to be Taiwan only..
Strategy investment
If we have low production order it sustains skills and capabilities. Vital we have this. You can’t buy stuff from the Chinese if you are arming to fight against them. Not everything has to be private , some key industries need to be owned by the government. Other countries protect key infrastructure.
Can you point to the civil servant or politician in charge in Whitehall who knows anything about semi conductors?
As a general rule government should avoid industry.
Since they allowed ARM to be bought, that evidenced no understanding.
The US and Netherlands already agreed not to sell key x-ray lithography tools, critical for high performance chips, to the CCP.
So CCP will be stuck on commodity mid range chips until they work out lithography for themselves. Not a problem if you make washing machines and low end smartphones..
However CCP does have leverage on rare earth metals supply required for high technology products. So prices may go up as CCP decides to keep those for themselves.
Alternative sources and freedom from coercive relationships that restrict supply require attention… Belt and Road, bad!
Where has it said we are using the ‘Defence Budget’ to purchase it?
Excellent. Just like the MOD purchase of Sheffield Forgemasters, this will protect our defence industrial base. It must be obvious even to those most wedded to market forces that a small country like UK has to have control and ownership of critical capabilities. If we don’t, the subsidized US defence companies, enjoying legal monopoly of the US defence market, will become even more dominant.
Sadly judging by some comments here it’s not so obvious and that stuns me that people don’t understand the importance of such technologies and why other countries are spending billions just trying to jump on the bandwagon of technology we already possess. Jeez even China is frantically trying to attain self sufficiency in micro processor technology so much of which is under western control
I think people are pointing out that it is a mixed blessing. Yes we need these industries not to be dependent on China, but on the other side we are both broke and the British Govt doesn’t exactly have a stellar record in managing Nationalized Companies.
Completely agree! Commercial priorities will always take production to a cheaper (read abroad) places. See Tata Steel and we now can’t produce virgin steel that is needed for defence and other needs. If India has a opposing view to us they can easily choke off supply. This is just one scenarios for one industry. Else china will buy it up cheap and then copy the IP and look to sell it to us (or not) as it chooses – see rare earths restrictions).
About time. Previously quite a few defence establishments were government owned. Government does not need to run such sites (they are particularly bad at it), but if they own it, they get to decide who runs it & what the rules are.
The French manage such matters so much better than us, they have a water company that owns large parts of Hollywood for heaven sake. It’s how you manage things that’s important rather than taking ill conceived political (too often party political) stances on the matter that refuse to take an objective view.
Interesting.
MoD owned?
“ including advancements in artificial intelligence, quantum technologies, and 6G.”
Brave statement as nobody has defined what 6G is yet!
No one has really defined a 6th Gen fighter yet but hey we are designing one, which I guess is the point you don’t wait until what is an understandably nebulous concept to be set in actual concrete before you start imagining it in reality even if it changes along the way. Fact is whatever 6G becomes it will rely on very advanced chip technology, it may be a little chicken and egg but you don’t get there unless both are developed to enable the other. Software both dictates and is dictated by the hardware, TSMC dominates the Arm chip… Read more »
It is a little bit different with telecoms like 6G which are agreed to international standards!
6th gen fighters are built to the most advanced achievable and affordable tech.
6G has to be cheap to bulk manufacture and install across the world.
I’m bemused about this semiconductor plant as I didn’t think it had the most recent generation of fabrication tech.
But it appears to have quietly been doing military fabrication for a long time.
It doesn’t it has been described as aging and the prior owners were going to close it down if a buyer couldn’t be found after losing a big contract with Apple.
Probably a sensible way to go, in reality semi conductors are a massive western nation supply chain weakness..one in which any war with china over Taiwan would be a major problem. china has been hammering away at the semi conductors market really hitting other nations market share of the business..it’s basically upped its segment of the market by 62% over the last year, Korea is down 20%, Taiwan is down 31%, U.S. down 19%, Europe down 41%. when you think around 80% of the Market share in semiconductor sales sits with china, Korea and Taiwan..any western pacific war will essentially… Read more »
Someone who gets it, the MoD and Govt takes a whacking on here for its short sightedness, sadly that quality goes far deeper, as even as we see on UKDJ there are strong indications.
Yup, very good point. Any large scale war in the future would be all about industrial capacity something our politicians are rediscovering in Ukraine. However, the lessons were already there to learn. Germany’s Spring Offensive in WW1 was defeated by the industrial response of the Western Allies. In the UK General Haig issued a call for support on the home front. It was answered in some style as production of everything from SE5a fighters to coal shot up – with production records being broken all over the place. In Germany, industrial output fell as the population were starving and revolution… Read more »
Most people really have no idea what the idea of war means to the Chinese. I cannot remember exactly how many it was but the Chinese war book contains between 50-70 types of warfare it engages in…and most of that it does all the time..it does not believe in the concept of peace and war as different states..to china war is not the continuation of politics by other means..that’s very western…to china politics is simply the continuation of war by other means..as is everything else…the CCP has a uniquely warlike take on the world..it just believes that kinetic military operations… Read more »
That will be the first thing the Tories sell off at a knock down price as soon as they get back into power.
Neither Conservative nor Labour ( new or old) have shown any long term competence at protecting the defence industrial base. In manufacturing generally, new labour oversaw a bigger loss of manufacturing jobs than the Thatcher/Major governments.
But there are some signs that even the hapless dimwits in Westminster have begun to understand.
Wishful thinking more like
Ukraine..!
It’s the one can they cannot kick down the road. Although to be fair it is also the one can that they all seem to agree on. Which is a bit sad really given that so many of our country’s ills could be sorted with a bit of common sense and cross party consensus.
Oh well…
Cheers CR
Who had the foresight to buy Sheffield Forgemasters, then?
Did they finely sell off S.F ?
If the tories do plan to sell strategic industries off in the future, they are obviously PRC/CCP agents really.
One moment of common sense doth not make a less clueless government.
The stories did sell off the DRA who were making a tidy sum for the U.K. government selling parents.
Btw you have them to thank for Flat screen TVs
Sheffield steel master was bought back under Tory watch, but yes look at sales by prior chancellors, tory or labour both as bad as each other.
Maybe the government should take back the GPSS. From what i hav3 read, the goverment sold it for 85 million to a Spanish firm (CHL) and charge the MOD nearly 240 million to use. We do need prorect semiconductor manufacturing in the UK.
It’s sadly becoming a trend that the last factory in the UK manufacturing XXX has to be nationalised to stop it closing or falling into Chinese ownership. The next big call is H&W and FSS. Navantia wants to build the ships in Spain, but if suitably incentivised it will take over the H&W Belfast shipyard where nearly half the work was to be undertaken. However, it has no interest in the other companies/shipyards in the H&W Group. It’s a tough call for the MOD and the government – a retender will almost certainly result in the hulls being built in… Read more »
Isn’t Babcock the most likely candidate for a H&W takeover? If they bought even just the Belfast yard, then they would become the preferred bidder for all future RN and RFA vessels bar the tier one escorts (which BAE will likely remain the builder of).
As long as Babcock still thinks there is profit to be made in shipbuilding then they have good reason to pursue a H&W takeover in my opinion.