Investors and funding

After a two-year wait, the UK has finally announced its semiconductor support plan, aiming to grow the domestic sector, increase its competitiveness, and reduce the risk of supply chain disruptions. But while industry players welcomed the strategy, they also criticised its level of support.

Under the new scheme, the government will invest up to £1 (€1.15) billion in the next decade, with an initial £200 million to be deployed in the next couple of years.

This amount, however, is dwarfed by similar initiatives in the West. The US has pledged $52bn in subsidies to boost its domestic semiconductor industry, while the EU’s Chips Act is offering €43bn to attract chip makers to build facilities within the bloc and ensure a European chip supply.

For Amelia Armour, partner at Amadeus Capital Partners, a UK VC firm which invests in semiconductor startups, the government’s funding is insufficient.

“The level of investment announced for the next two-year period is disappointing, especially considering the UK needs to try to keep pace with the investment levels announced as part of the EU and US Chip Acts,” Armour told TNW. “£200m spread over many initiatives won’t achieve much and will need to be allocated in a very targeted way to have an impact.”

Spreading the £1bn investment over a decade is also problematic, according to Amanda Brock, CEO at OpenUK, a non-profit organisation which represents the country’s open technology sector, including leading chip design company Arm.

“It simply won’t build a world-leading semiconductor sector even with the existing world-class R&D experience we have in the UK today. We need to see faster action behind bigger numbers to achieve the goal,” Brock explained.

Unlike the US and the EU, the UK’s plan comes without particular focus on strengthening manufacturing capabilities. Instead, it targets international cooperation and the growth of focus areas where the country already holds a leading position: R&D, design, compound semiconductors, and intellectual property.

The funding will also be used to improve the talent pipeline and enable easier access to necessary infrastructure for British firms, with a special focus on startups and SMEs.

According to Mark Lippett, CEO of Bristol-based semiconductor company XMOS, manufacturing isn’t the only way to ensure competitiveness and a secure supply chain.

“The UK will not be able to develop a full supply chain to fulfill its semiconductor needs — it’s beyond the scope of even the US or Europe,” Lippett told TNW. “The question is, how does the UK secure ‘a seat at the table’ when global allocation is being determined? By having technology that the others want.”

But for OpenUk’s Brock, coupling investment with skills, deep industry knowledge, and a semiconductor manufacturing sector are key elements for the UK’s success.

“Until the UK has all of those building blocks in place, either in-country or as part of established semiconductor supply chains that will involve the UK as a principal supplier, it will not be close to being the global science and technology superpower [Sunak] is seeking,” she said.

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ChatGPT has spawned a new sector of AI chat apps — and Europe’s at its epicentre. Since the tool launched in November 2022, these apps have been downloaded 23.6 million times from the Google Play Store, according to research by App Radar.

The study uncovered 40 AI chat apps with over 10,000 users that harness ChatGPT or similar tech. Europe emerged as the global leader of the nascent segment. The continent was the birthplace of 14 apps that bagged a total of 8m downloads — 34% of the entire sector.

The remainder was divided between the Americas (nine apps with 2.7m downloads) and Asia (seven apps with 7.4m downloads). A further eight apps with 5.2m downloads had an unknown country of origin.

Thomas Kriebernegg, co-founder and managing director at App Radar, ranks the boom among the most explosive he’s ever witnessed for a new sector. He largely credits media interest in generative AI and the perception that ChatGPT is groundbreaking. In Europe, the growth has been further accelerated by talented devs and a receptive public.

“Generally speaking, European consumers are much more willing to experiment with new technology than people in other regions. You can see that clearly when you compare usage numbers for fintech apps and solutions in the UK with the US,” Kriebernegg told TNW via email.

“This culture enables European app developers to grow their consumer base faster before expanding into new territories.”

The continent’s standout country is Turkey,  which has attracted 5.9m downloads across four apps — including the top three. With a rising development ecosystem, a mobile gaming hub, regulations supporting startups, and an expanding list of tech successes topped by Getir, the country is a potential powerhouse in the segment. But converting its early advantage into a lucrative ecosystem will be challenging.

In the new wave of AI chat apps, promising user bases haven’t yet produced high revenues.

At present, AI chat apps are typically monetised with ad revenue and premium subscriptions, but basic use is essentially free. To secure a large, paying customer base, devs will need to offer unique services that add major value. Unfortunately for the app-makers, existing users appear reluctant to invest.

Nonetheless, Kriebernegg expects the sector to continue growing — for now.

“Oftentimes app segments end up getting dominated by 10 or 20 apps that account for the vast majority of users,” he says. “At the moment eight apps have more than a million users, so there’s plenty of room for new challengers.

“As the market starts to coalesce and leaders emerge it will become much more difficult for new entrants to compete unless they bring something unique and innovative to the table.”

“It’s clear that this is just the beginning.

Most of the current apps are in the ‘Productivity’ and ‘Tools’ categories of the Google Play Store, which suggests that they’re designed for day-to-day work and tasks. A smaller group within the ‘Entertainment’ category is intended for companionship.

Analysts expect new use cases to emerge fairly quickly, but it’s still unclear whether customers will ultimately prefer specialist AI apps or ‘one-stop shops’ that cover various tasks.

For the early app users, ChatGPT appears to predominantly provide a smarter search function or a quicker way to draft messages. The model’s Q&A capabilities are particularly popular, which may further alarm Google about the future of search.

“ChatGPT apps enable this type of natural searching, presenting information in a really intuitive way,” says Kriebernegg. “It can be more accurate and much faster than using these questions or keywords on Google. As a result, people are really embracing ChatGPT apps as assistants.

“However, it’s clear that this is just the beginning. I would expect, once people really get to grips with generative AI, they will start to look at how they can automate daily tasks or assist with creativity — such as producing imagery or music.”

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