The logistics sheds outside Newport, and the clean rooms in Cardiff may seem distant from the giant fabs of Taiwan or Arizona, yet by late 2025, a cluster of Welsh semiconductor firms will have become central to the question of how Britain keeps a foothold in the global chip shortage era. South Wales now carries a disproportionate share of the UK’s ambition to build strategic strength in critical chips, rather than depend entirely on imports. For policymakers, investors and local communities, the core issue is whether this activity can deliver real industrial resilience or remains mostly political branding.
South Wales Chips Anchor a Focused UK Strategy
The UK’s National Semiconductor Strategy set out a deliberately narrow plan. Instead of trying to recreate cutting-edge logic fabs already dominated by a handful of global players, the government has chosen to back British advantages in research, design and compound semiconductors such as gallium nitride and silicon carbide. These materials are the basis for power electronics, radio frequency devices and photonics in 5G infrastructure, electric vehicles and advanced sensing.
Within that strategy, Wales is presented as a cornerstone. Successive UK and Welsh administrations have channelled public money into facilities that span the full chain, from epitaxial wafer growth to device design and applications testing. Cardiff University’s Institute for Compound Semiconductors and its joint venture with IQE provide research and prototyping capability, while the Compound Semiconductor Applications Catapult in Newport is tasked with turning prototypes into manufacturable products in sectors like power electronics and radio frequency systems.
Official investment briefs promote South Wales as an “end-to-end” environment where overseas and domestic firms can plug into university research, specialist suppliers and export-focused factories. That pitch has been reinforced by CSConnected, the industry-led cluster body, which reports that by 2024 the regional compound semiconductor ecosystem was supporting thousands of jobs in Wales and contributing hundreds of millions of pounds in gross value added across the wider UK economy, with most of the output shipped overseas.
The question is no longer whether a cluster exists. It is whether this concentration of skills and kit can genuinely influence the supply of critical chips at a time when semiconductors have become both industrial backbone and geopolitical fault line.
Inside The Compound Semiconductor Cluster
Strip away the headline numbers and the South Wales cluster resolves into a dense network of large anchors, mid-sized specialists and younger firms.
IQE, based in Cardiff, sits at the centre. It manufactures epitaxial wafers that form the substrate for compound semiconductor devices used around the world, especially in wireless communications and sensor applications. Its longevity, export record and partnership with Cardiff University through the Compound Semiconductor Centre have been key in persuading both government and investors that South Wales is a credible location for high-value semiconductor manufacturing.
Sharing that landscape is the CSA Catapult, a publicly backed organisation headquartered in Newport. The Catapult does not produce chips for its own catalogue. Instead, it offers design support, packaging, testing and system integration to companies of all sizes, with the explicit aim of helping them move from prototype to volume production. It also acts as a neutral convener, linking Welsh firms into national supply chains in aerospace, automotive, energy and defence.
Around these institutions sits a growing tier of small and medium-sized enterprises. CSconnected’s membership lists show a mix of device makers, packaging specialists, equipment suppliers and software firms located across the Cardiff Capital Region. New facilities such as Centre 7, opened in 2025, provide modern space and shared infrastructure for early-stage businesses, including clean room access and support services that individual startups could not afford alone.
Many of these younger companies have been spun out of Cardiff and Swansea universities. Academic labs and translational centres provide access to process tools, metrology equipment and engineering expertise, while public funds under the UK Research and Innovation Strength in Places program and local growth schemes offer grants to de-risk early activity. The result is an ecosystem in which a novel device concept developed in a university project can, in principle, move through pilot fabrication and system integration without leaving South Wales.
Taken together, the anchors, Catapult infrastructure and expanding group of Welsh semiconductor startups resemble the “triple helix” of universities, industry and government often invoked in industrial strategy documents. In contrast to other policy experiments that remained largely on paper, the South Wales version is visible in the concentration of specialist facilities around Cardiff and Newport and in a labour market where compound semiconductor skills are beginning to form a recognisable career path.
Newport Wafer Fab and Startup Opportunity
No assessment of Welsh semiconductor prospects can ignore Newport Wafer Fab. Long regarded as a strategic national asset, the site has experienced a turbulent few years that mirror wider struggles over control of critical chip production.
Previously owned by Nexperia, a Dutch company ultimately controlled by Chinese interests, the factory became the subject of a national security review under the National Security and Investment Act. Following an order for Nexperia to divest, the UK Government later cleared the sale of the facility in 2024 to US-headquartered Vishay Intertechnology. The reported price was in the high hundreds of millions of dollars, signalling both the perceived value of the site and the degree of international interest in securing production capacity on British soil.
Vishay has since outlined plans to refit and expand Newport as a major production centre for power semiconductors, including silicon carbide devices used in electric drivetrains and industrial equipment. A Treasury announcement in early 2025 highlighted a proposed quarter of a billion pounds investment package associated with the plant, framed as part of a wider resurgence in UK advanced manufacturing and supported by the Automotive Transformation Fund and regional development partners.
For smaller Welsh firms, Newport presents a double-edged picture. On one side, the presence of an operational wafer fab within the region is a clear advantage. It creates a local market for equipment and services, anchors highly trained engineers and, at least in theory, offers a domestic route for producing certain categories of chips without relying entirely on faraway foundries.
On the other hand, the priorities of a multinational owner do not always align with the needs of early-stage ventures. A large fabrication facility will naturally focus on its own product roadmap and its largest customers. Startups pursuing niche devices or low-volume production runs may still find themselves dependent on external fabs in mainland Europe, the United States or Asia, particularly if their designs require process steps that are not yet installed in Newport.
Cluster leaders and government advisers increasingly frame the answer as a layered approach. Rather than assuming a single plant can serve every need, they emphasise shared pilot lines, open access tools and design support across the wider cluster. The CSA Catapult, university facilities and collaborative projects funded through CSconnected are expected to provide flexible environments where new ideas are proven, with any high-volume manufacturing then directed to appropriate fabs inside or outside the UK.
Can Wales Really Ease Chip Shortages
During the pandemic, public debate often treated semiconductors as a single undifferentiated commodity. Empty car showrooms and delayed electronics created a sense of one global shortage. By 2025, industry analysis paints a more nuanced picture. Different parts of the market move on different cycles. Memory and advanced logic for artificial intelligence data centres swing between tightness and oversupply. Automotive manufacturers worry specifically about long lead times for power devices. Defence and telecoms customers focus on secure sources for certain radio frequency and sensing components.
Within this patchwork, South Wales will not dictate the supply of leading-edge processors for smartphones or hyperscale cloud providers. Neither the UK National Semiconductor Strategy nor local economic plans make such claims. Instead, Welsh contributions sit in defined parts of the value chain where compound semiconductors are already essential.
In power electronics, the focus for Newport and several cluster firms is on silicon carbide and gallium nitride devices that improve efficiency in electric vehicles, charging infrastructure and industrial machinery. Gains at this level translate directly into range, energy consumption and operating costs. Securing more diverse sources of such components is a priority for automotive makers seeking to reduce exposure to bottlenecks in a small number of overseas fabs.
In radio frequency systems, Welsh companies supply wafers and devices that feed into global telecoms equipment supply chains. These components underpin mobile base stations and high-frequency links that carry ever-increasing data volumes. Compound semiconductors are also central to photonics and sensing devices used in industrial automation, defense and environmental monitoring, areas where the CSA Catapult has been particularly active in supporting applications.
By adding capacity, skills and innovation in these specialised areas, the South Wales cluster contributes to a broader diversification of supply. It cannot remove systemic risks or eliminate geopolitical friction. It can, however, give the UK and its partners more options when particular technologies or suppliers come under strain, and it can create domestic expertise that informs procurement and regulation even when chips continue to be sourced globally.
The nuance that often drops out of political soundbites is that Wales is not “solving” the global chip shortage. It is strengthening specific links in the chain that matter for net zero targets, national security and digital infrastructure, while building an export platform that supports high-value employment at home.
Capital Skills And Levelling Up Stakes
Any attempt to understand whether the Made in Britain rhetoric has substance in semiconductors must also consider capital flows and skills.
On the funding side, the cluster has drawn on a combination of UK Research and Innovation programs, Welsh Government grants and private investment. The Strength in Places Fund provided early backing for CSconnected, supporting collaborative projects that span companies, universities and the CSA Catapult. Additional regional funds from Cardiff Capital Region have targeted infrastructure and business support, while inward investment agencies have worked to attract equipment suppliers and engineering firms to co-locate in South Wales.
Major global players have taken notice. Companies such as KLA have opened engineering and support facilities in the region, attracted by the concentration of customers and research partners. Their arrival not only brings direct employment but also signals to other potential investors that South Wales is a credible location for advanced manufacturing and metrology.
On the skills front, universities and colleges are racing to turn ad hoc arrangements into a structured pipeline. Cardiff University’s Institute for Compound Semiconductors runs postgraduate courses and research programs that place students directly into industrial projects. The CSA Catapult offers apprenticeships and professional development for engineers who need to cross from related sectors into compound semiconductor work. Further education providers and exam boards have begun to introduce dedicated qualifications, including courses developed with WJEC that aim to embed basic knowledge of semiconductor technology at an earlier stage in the education system.
The labour market effects are already visible. Roles in the cluster typically pay above regional averages and require a mix of technical and professional skills. Economic assessments suggest that each direct job supports additional employment across supply chains, local services and household spending, magnifying the impact of each new hire.
Fun fact: An annual review of the South Wales compound semiconductor cluster reported that every full-time role in the sector supports more than one extra job elsewhere in the UK economy, showing how highly specialized clean rooms can underpin livelihoods far beyond their own walls.
For policymakers who placed “quality jobs” at the heart of levelling up rhetoric, this multiplier effect is one of the strongest arguments for continued backing. It suggests that even modest expansions in headcount at key employers can have outsized effects on local prosperity, particularly in areas that previously relied on lower-value logistics or service work.
The flip side is that such concentration carries risk. If global cycles turn or corporate strategies shift, the same dependence on a relatively small set of high-value employers can expose the region to sudden shocks. The level of political attention now focused on South Wales reflects both the opportunity and the potential vulnerability.
Risks That Shadow the Made in Britain Story
Optimistic speeches about Made in Britain 2.0 sit alongside structural constraints that are harder to shift.
The first is the inherent cyclicality of semiconductors. Even though some segments remain tight, others have moved into temporary surplus. Reports over 2024 and 2025 describe waves of investment in capacity followed by pauses as demand in particular product categories softens. South Wales firms exposed to a narrow slice of the market or limited customer bases may find revenues fluctuating sharply as these cycles play out. Smaller companies, in particular, can have little buffer when orders are delayed or cancelled.
The second is continued dependence on overseas owners and markets. Vishay’s acquisition of Newport and the foreign ownership of other UK semiconductor assets show that strategic facilities are often controlled by multinational groups. While national security legislation can restrict certain transactions, it does not change the fact that boardroom decisions in the United States, Europe or Asia can reshape production footprints and investment plans in Wales.
Third, the cluster relies heavily on imports of critical tools and materials. High-end lithography systems, speciality gases and some substrate materials are produced by a small number of global suppliers. Even if device design and packaging decisions are made in Wales, production can still be constrained by bottlenecks in the Netherlands, Japan or the United States. This limits the extent to which local policy can insulate the region from external shocks.
Finally, there is policy risk. Semiconductor strategies, support packages, and industrial funds are politically constructed. They are vulnerable to shifts in fiscal priorities, changes of government and competing demands from other sectors. While the National Semiconductor Strategy and associated announcements have so far enjoyed cross-party recognition of the sector’s importance, long-term projects of this nature require consistent backing across electoral cycles. Any loss of momentum could be felt acutely in a cluster where many firms are still in the scale-up phase.
What Success By 2030 Would Look Like
By the end of this decade, South Wales is unlikely to be mentioned in the same breath as the world’s largest chipmaking hubs, and it does not need to be. A realistic definition of success would rest on a series of practical outcomes rather than grand comparisons.
One marker would be continuity and growth at anchor facilities. If Vishay’s investments at Newport proceed as planned, with new production lines for power devices commissioned and the site operating as a reliable supplier into European and global electric vehicle and industrial markets, then the plant will have secured its position as a core part of the UK’s semiconductor landscape. Similar stability and incremental expansion at firms such as IQE would reinforce that base.
A second marker would be bin-depth among smaller companies. Startups and university spin-outs currently operating from shared facilities and incubators would have graduated into stable commercial businesses, employing larger teams and generating export revenue from specialised devices, modules and services. Some consolidation and failure are inevitable, but the overall number of viable Welsh semiconductor SMEs and mid-sized firms should be higher, providing a more resilient ecosystem.
A third marker would be integration with broader national programs. Welsh firms would be regular participants in defence procurement, net zero infrastructure projects and critical digital systems, not occasional add-ons. The CSA Catapult and CSconnected would maintain strong links with other regional technology hubs, so that supply chains, knowledge and investment flow across the UK rather than remaining siloed.
If those conditions are broadly met, the story of Welsh semiconductor startups and their larger neighbours will amount to more than a branding exercise. South Wales would be supplying distinctive, high-value components into global markets, shaping parts of the global chip shortage response and supporting skilled employment at home.
In that scenario, the clean rooms of Cardiff and the fabs of Newport become more than visual symbols. They stand as evidence that a medium-sized country can choose targeted points of leverage in a complex global industry and build around them. The next five years will show whether policy, private capital and demand align closely enough to turn today’s promising cluster into a durable national asset rather than a short-lived surge.
