Semiconductors: What a deep dive into Cambridge’s microchips sector can tell us about how our ecosystem creates and scales world-leading innovation
03/09/2024
In this blog we explore the semiconductor ecosystem in Cambridge and the key ingredients that have helped it to emerge as one of the most important regional clusters for a technology that is fundamental to modern life.
It’s no exaggeration to describe Cambridge’s economy as genuinely world leading. The Global Innovation Index pinpoints Cambridge as the highest intensity science and technology cluster in the world – more intense than San Francisco, Boston, Beijing or Tokyo.
Why? A deep dive into one of our most important emerging sectors can reveal some important drivers of growth in innovation clusters and highlight how significant Cambridge’s role in the UK is when it comes to tech and innovation.
What are semiconductors?
Semiconductors are material products that have the ability to act as both a conductor and insulator of electricity, depending on their conditions. They are also referred to as integrated circuits (ICs) or microchips, and they are the basis of all electronic devices. They are so essential to modern society that the production of semiconductors is a major geopolitical issue.
“Semiconductors are the core component of all electronic devices, and underpin our economy, national security and modern way of life.”
– UK’s National Semiconductor Strategy
The semiconductor “sector” in Cambridge
Cambridge is home to a widely recognised semiconductor cluster, highlighted in the UK’s £1bn national semiconductor strategy, parliamentary inquiries and market research. However, there is no definitive list of ‘semiconductor companies’ in Cambridge, in part due to the complex and specialised nature of the semiconductor supply chain which makes it difficult to pin down one “sector”, where in reality a wide range of firms are engaged in activity that is important for the design, testing, production and utilisation of semiconductors.
“It is the diversity and scale of Cambridge’s technology cluster that gives it its strength, semiconductors included. This diversity provides a unique hotbed for semiconductor innovation, drawing upon insights from other employers and sectors in the region. We see this happen even within Cambridge Consultants - decades ago we were the first to combine radio and digits on a CMOS process and we continue to be inspired by our links to industry. Others like Arm and Pragmatic work closely with their end users and industry partners to inform their innovation roadmaps and investments, ensuring an alignment of industry needs with availability of technology in silicon.”
– Jez Stark, Global Head of Consumer Business, Cambridge Consultants
Across various sources including our own Cambridge Cluster Insights database (produced by the Centre for Business Research), Barclays Eagle Labs’ review of the UK’s semiconductor clusters, and discussion with our membership we have drawn together a list of at least 18 firms considered to be part of the semiconductors sector in Cambridge. The semiconductor ecosystem is complex, and firms can be grouped loosely into different stages of the supply chain though many are active across different areas:
This list of Cambridge firms includes university spinouts making major breakthroughs in materials technology, potential industry disruptors building the UK’s largest semiconductor ‘fab’, and one established semiconductor IP giant in Arm. 300bn chips based on Arm IP have been produced since the company was founded in 1990. That’s a little fewer than 3 chips for every human that has ever lived, in a little over 30 years.
“Arm is building the future of computing, with a global team of engineers designing the computing platforms that power some of the most innovative technologies in the world today. Over the last three decades, our Cambridge headquarters has served as a hub for an ecosystem that is responsible for shipping 300 billion chips in products from the sensor to the smartphone and supercomputer. Cambridge is a major talent hub, and home to a thriving academic and business community that we are proud to be a part of.”
– Gary Campbell, EVP, Central Engineering, Arm
What has driven the development of Cambridge’s semiconductor sector?
Knowledge capital
Knowledge capital, “the accumulation of ideas and know-how”, underpins the semiconductor sector in Cambridge.
The status and growth of the sector relies in large part on the knowledge and research breakthroughs incubated here. For example, Cambridge is a leading region for pioneering materials technology in Gallium Nitride and Graphene associated with University of Cambridge spinouts like Cambridge GAN Devices, Paragraf and Porotech. These materials have the potential to considerably alter the semiconductor landscape by providing alternatives to traditional silicon-based chips.
Arm, by far Cambridge’s largest semiconductor firm, has a business model founded in the power of its chip intellectual property (IP), which is licensed out to other firms that then actually produce chips. Over 99% of the world’s smartphones use chips designed with Arm IP.
The scale of the Cambridge ecosystem’s influence over intellectual capital in this space becomes clear when comparing patent approvals. Barclays Eagle Labs research exploring a number of ‘high growth’ semiconductor firms in the UK found rich intellectual activity but a relatively low number of patent approvals (an estimated total of 3 granted patents to the ‘high growth’ firms in 2021, the most recent year considered in the research). In the same year, the Intellectual Property Office’s register of patents shows that Arm alone had over 260 patents approved.
Patents approved only captures one part of the innovation in this sector but serves as a useful metric against which to understand the scale of the knowledge capital driving Cambridge’s semiconductor sector.
The presence of this innovation in Cambridge has also attracted other international firms that use semiconductors – particularly those designed using Arm IP – in their products. For example, Apple moved into a new 80,000 sq. ft office on Station Road with capacity for up to 900 employees in 2022 and Microsoft Research has over 200 employees here. Samsung have an office in Cambridge North employing over 160 people.
“Regularly meeting to exchange new results and ideas is key to driving collaborative research activity in the UK’s tight-knit nitride semiconductors community. Cambridge is a fulcrum of nitride activity, providing material for multiple projects including a new Innovation and Knowledge Centre (IKC) in partnership with Bristol and Warwick universities. This key position in the community allows us to spot important links and emerging themes and act as a broker in new collaborations.”
– Professor Rachel Oliver, Director of the Cambridge Centre for Gallium Nitride and Co-Founder of Porotech
Human capital
Ideas don’t emerge from nothing, and are inherently connected to the people that invent, innovate and disseminate them.
Over 3,000 people work in the 18 companies we have identified as the semiconductor sector in Cambridge, though this is likely an underestimate due to the complex nature of the supply chain described above. These firms alone are larger than the hugely important compound semiconductor cluster in South Wales, which is estimated to employ around 2,300.
The size of this ecosystem means immense human capital exists – the knowledge, skills, and experience of the people working in the sector. This means Cambridge firms are able to instigate and support a huge amount of collaborative research with both academic and private sector partners. One example is Arm’s longstanding collaboration with another Cambridge-based firm, Pragmatic, which led to the production of the world’s first fully functional non-silicon Arm-based chip in 2020.
The University of Cambridge plays a hugely important role in attracting and developing the people who are the foundation of many of Cambridge’s most innovative sectors. Of the 18 semiconductor firms we have identified in Cambridge, half of them are spinouts from the University. And more have ex-University researchers or staff in leading roles. Arm similarly acts as an anchor institution, attracting international talent to Cambridge and developing their knowledge and skills. The value of this human capital to the wider ecosystem extends beyond the collaboration it enables. Many ex-Arm employees have played leading roles in other firms as founders, advisors and senior members of staff. For example, Agile Analog was founded by Tim Ramsdale, previously a senior executive at Arm – and there are many other similar examples both inside and outside of Cambridge.
“Cambridge is a great place to found a spinout company because of the depth and breadth of talent available in the local region. The University offers a great source of bright and enthusiastic scientists and engineers, who bring an enormous amount to the technical side of the company, and the surrounding ecosystem, with its broad range of semiconductor initiatives, venture capital activities and other tech industry also provides a fertile recruitment ground for key people on the operational and management side.”
– Professor Rachel Oliver, Director of the Cambridge Centre for Gallium Nitride and Co-Founder of Porotech
Financial capital
Finally, Cambridge is also a leading region when it comes to investment in semiconductor companies. Barclays Eagle Labs research shows that across all ‘high growth’ semiconductor firms in the UK, there was £160m of private investment in 2022. This includes a £45m raised by Paragraf, £28.2m by Pragmatic alongside successful funding rounds for other Cambridge firms like PoroTech and Cambridge GAN Devices.
The success Cambridge startups and spinouts have in attracting investment is in part due to the presence of organisations supporting commercialisation, such as Cambridge Enterprise, as well as the presence of the knowledge and human capital discussed above which attracts investors.
“The breadth and reach of the Cambridge intellectual and business networks play an important role in promoting the UK’s semiconductor capability. It is encouraging to see the knowledge and connections our Eagle Labs and Corporate Bank bring together to support continued regional growth.
Barclays is a committed partner to the new government’s aspiration to raise economic growth in the UK. Crucial to realising this ambition is increasing business investment - both within our domestic economy, as evidenced by our own £30bn investment into the UK, and by mobilising inward investment to come to Britain.
– James Lean, Industry Director, Barclays Corporate Banking
Again, we can see some key institutions playing a role in this feature of the Cambridge ecosystem. For example, Arm has made direct investments in Pragmatic and this has paved the way for public investment too – such as the £60m investment Pragmatic received from the UK Infrastructure Bank in 2023. The VC fund and accelerator DeepTech Labs counts both Arm and the University of Cambridge as founders alongside Cambridge Innovation Capital and Martlet Capital. DeepTech’s portfolio includes Cambridge based semiconductor firm WavePhotonics and Oxford-based Salience Labs as well as a whole host of other tech firms around the country.
There is a lively investment landscape in Cambridge which supports spinouts and startups to bring new ideas forward, driven in part by these Cambridge-based or Cambridge-linked investors. Scaling these companies up, however, is a different challenge and an area where the UK generally can struggle.
“Deep tech innovation in the UK is well supported. Deep tech scaling is not.”
- Simon Thomas, CEO of Paragraf [Source]
Why does this matter?
The new Government have laid out a clear mission: to achieve the highest level of sustained growth in the G7 by the end of this parliament. By exploring one of Cambridge’s most exciting innovation sectors we can shed some light on the factors that drive growth in Cambridge's science and technology cluster. These factors highlight Cambridge's strengths, but also remind us that our innovation economy is not ‘unique’; we can and should be learning from the positive effects of the agglomeration we see here and the innovation it fosters, and considering how these effects can be spread more broadly and equally. Encouraging growth is just one part of the picture, and our wider programme of work at Cambridge Ahead focuses on the important question of how such growth can occur more sustainably and inclusively.
While this blog has focused on the semiconductor ecosystem in the Cambridge area, the influence of this ecosystem actually goes far beyond that immediate geography. For example, there are important and growing connections between Cambridge based semiconductor firms and other regions - Pragmatic are building the UK’s largest ‘fab’ in in Durham; Arm’s corporate offices are based in Manchester; research collaborations are being established like Rewire IKC which involves the University of Cambridge as well as those in Bristol and Warwick. These connections highlight another key theme of our current work at Cambridge Ahead – that there exists a complex interconnectivity between the UK’s innovation clusters, and Government should do more to understand and support these connections to help areas like Cambridge support sustaiable and inclusive growth in other areas across the country.
Alex Rossiter, Senior Policy Manager