The TL;DR
The UK will make “strategic purchases” of AI chips from British companies to be kept in the country. Kendall aims to build a £37B chip industry with a 5% global share.
The UK government will offer to buy AI chips directly from British technology companies in a bid to keep them in the country. Technology Secretary Liz Kendall will outline plans to “buying strategies” of semiconductor devices from UK-based industries at London Tech Week this week, the Telegraph reports.” The plan includes access to taxpayer-backed funding and investment in skills to keep workers in Britain.
The announcement is part of a wider AI hardware initiative targeting 5% of the global chip market, which could translate into an estimated £37 billion in revenue and tens of thousands of jobs. The government has already committed £100 million to the ARIA computer programme, including £50 million to establish a benchmarking lab where British start-ups can test and demonstrate that their hardware works.
The urgency is clear. Britain keeps losing its best chip companies to foreign buyers. SoftBank acquired Graphcore in 2024. Qualcomm bought Alphawave IP for $2.4 billion last year. Arm, the UK’s most important chip designer, has chosen New York as its flagship for 2023. Each move weakens the case that Britain can maintain its own semiconductor industry.
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“This is especially important for technologies that can be completely dependent on other countries, especially in areas such as defense, financial services and healthcare,” Kendall said in a speech to Bloomberg in January, when he announced a £1 billion grant to expand the UK’s AI research computing capacity by 20 times.
The purchase of the chips will make the government a customer, not just a regulator, giving British firms guaranteed demand. Six UK companies have already gained access to government-funded supercomputers to develop their AI models, with the government retaining the right of first refusal on future investment. Fractile, a British chip startup that recently raised $220 million and is reportedly in talks with Anthropic, is among the firms the strategy aims to back.
These programs also respond to concerns about foreign dependence on government procurement. A recent parliamentary report warned that the US company Palantir should not play such a significant role in the UK public sector, and flagged the growing reliance on Microsoft and AWS. HMRC’s £175 million AI contract with London-based Quantexa was an early sign of the government’s preference for domestic suppliers.
Whether strategic purchases alone can prevent the next Graphcore from being sold abroad is still an open question. Britain has an engineering talent and research base. What’s missing is domestic demand and the patient capital to keep companies growing at home instead of selling to SoftBank or Qualcomm where the first offer is made.
