British microchip champion launches US operation in blow to Sunak

Prime Minister Rishi SunakA taxpayer-backed microchip champion has launched operations in the US after warning that meagre support from Britain could force it to move operations abroad.

Cambridge-based Pragmatic Semiconductor incorporated an American operation in February, according to company filings, as it seeks to start building facilities across the Atlantic.

Scott White, the company’s founder, also confirmed that the company was in the process of applying for funding from Joe Biden’s $54bn (£43bn) microchip subsidy scheme.

He said: “From a purely logical perspective, there is no reason for us to be a UK company.

“We don’t have the biggest markets here. We don’t have the most attractive environment for scaling manufacturing. We don’t have a strong skills base. If you started this with a blank sheet of paper and had no bias whatsoever, there are other places in the world that would make sense if we’re very honest.”

Joe Biden’s Chips Act is providing manufacturing subsidies to tech companies - Chip Somodevilla/Getty ImagesThe decision is the latest blow to Rishi Sunak’s hopes of reviving Britain’s microchip industry. It follows criticism of the Prime Minister’s £1bn semiconductor strategy, which has been dismissed by experts as insubstantial. London also suffered a severe setback earlier this year when British microchip behemoth Arm said it would float in New York instead.

Pragmatic, set up in 2010, makes low-cost and flexible microchips for use in items such as packaging and clothing.

It has been backed by the GCHQ-linked National Security Strategic Investment Fund and Future Fund Breakthrough, set up by Mr Sunak in 2021, as well as the CIA’s venture capital fund In-Q-Tel. In total the company has raised around £143m from investors including Arm, Britain’s biggest chip company.

Mr White has said that the company could follow Arm and float in the US. It is currently raising funds from private backers, with investment bank Lazard understood to be offering advice, but expects to go public the next time it raises cash.

Mr White said that Pragmatic had always planned to expand into the US beyond the company’s two existing UK sites. It ultimately plans to open hundreds of small facilities around the world.

He said that Pragmatic was applying for funding under the US Chips Act, which provides $39bn in manufacturing subsidies and requires a US-incorporated entity.

In contrast, Britain’s long-awaited chip strategy, published in May, did not set out details of how it would support manufacturers.

Mr White said: “In the areas that we do have a distinct advantage in the UK, like our technology, if we want that to continue to scale in the UK, that’s only going to happen if there isn’t an incentive for us to go build elsewhere.”

He said that Pragmatic hoped to remain headquartered in the UK, adding: “We’d like as much as possible to have the critical mass of the business remain in the UK.

“As long as we have the right support and the right intent here.”

Cambridge-based Paragraf is raising funds to scale up its manufacturing capacity - Jason Bye/Jason ByeMeanwhile Paragraf, a Cambridge-based technology company developing cutting-edge graphene microchips, has hired investment bankers Morgan Stanley to raise a new tranche of funding.

Industry sources said Paragraf may need to raise hundreds of millions of pounds to scale up its manufacturing capacity. It has so far raised £67m in funding from investors including Cambridge’s Parkwalk and In-Q-Tel. Morgan Stanley declined to comment.

The company, which also has funding from the British taxpayer, claims to have made significant breakthroughs in techniques for mass production of ultra-thin graphene chips, which could be used to make finely tuned sensors for electric cars and batteries.

In May, Paragraf chief executive Simon Thomas said the company had applied for funding under the US Chips Act. It has already launched a US subsidiary and earlier this year acquired a San Diego-based chipmaker.

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