Years after the COVID-19 chip shortage, UK defense electronics makers still face rationed supply and rising obsolescence, with smaller suppliers saying little has changed.
For years, chip buyers chased the lowest inventory, lowest cost and fastest delivery. Resilience now matters more, since a cheap chip is worthless if it cannot be obtained. Many treat a second supplier as their safety net, but that offers little protection once a chip goes out of production.
“The industry has learned absolutely nothing from the COVID experience. We’re still faced with obsolescence increasing by the day, allocation is coming back and none of the primes have engaged with the smaller companies to help them,” said Karen Salmon, chief executive of Force Technologies.
“People think it’s just a dual source. If I have two sources for the same chip, happy days. That doesn’t work because if the chip’s obsolete, the chip’s obsolete,” she said.
She said large defense primes talk about resilience but do not pass that planning down to smaller suppliers. Aerospace and defense equipment must be supported for 30 to 40 years, and Force builds and stores parts for 20 to 25 years.
“When it comes to building a piece of equipment and they’re one chip short, that’s not resilience. That’s just pure panic,” she said. “Eurofighter was designed in the 80s, and we’re still building Eurofighters. But that airplane has so much obsolescence. You need to plan it from the very minute you lay your board out.”
She said engineering and procurement rarely talk. A graduate engineer designs a board, and five years later procurement cannot buy the part. Resilience and sustainability are now buzzwords that few companies practice properly.
“Obsolescence should not be treated as an event. It should be part of the life cycle. By the time procurement cannot buy a chip, it’s already too late,” she said.
Ebrahim Bushehri, founder and chief executive of Lime Microsystems, said his company’s customers have become savvier. Because very few fabs in the world supply the base wafer technology behind their chipsets, they now ask which process a chip is built on to judge future shortage risk.
“When we talk about resiliency, we have to go down to that level to assess whether this is going to be a shortage or not, not just the chipsets themselves, but the actual technology that these chipsets are implemented on,” Bushehri said.
Primes pass it down
The panel, titled “Supply Chain Strategies for Continued Market Resilience,” was held on the Semiconductors UK stage of Microelectronics UK 2026 in London on September 29. Jalal Bagherli, co-chair of the UK Semiconductor Policy Advisory Panel and chairman of JB Advisory, moderated the session.
Lime Microsystems supplies radio chipsets for telecom and defense, and also buys chips for its own modules. Force Technologies, a UK-owned company in the west of England, has specialized in component obsolescence for 40 years and recently built a sovereign test lab in the UK.
Salmon said government money for defense goes mainly into lighter structures and new airframes.
“The investment in resilience through the MOD (Ministry of Defence) and the government is very poor, incredibly poor,” she said. “If you don’t have the electronics for the semiconductors to power those, then you haven’t got an aircraft anyway.”
She said European customers do not want parts sent to the US for testing, which is why Force built its UK test lab. It received no government funding, and many small and medium-sized enterprises (SMEs) are in the same position.
She recalled an unnamed defense company declaring at a semiconductor plant that supply problems were someone else’s concern.
“The primes need to manage their resilience and obsolescence in their supply chain. Don’t just pass it down,” she said.
Supplier loyalty has worn thin, as customers under allocation hop to whoever has stock that day. When Salmon worked at chipmaker Atmel and it announced a last-time buy before ending a part, staff picked the customers they liked best over those first in the queue. Now stock goes to the highest bidder, she said.
Bushehri said low-volume products that must be supported for years make supplier loyalty hard to build. Some of those customers now stockpile everything they will need for the next 20 years.
“It’s impossible for any country to build every chipset that you want to consume for various products. So we still are reliant on partners in other regions of the world,” he said.
He said countries should instead focus on key components for given applications and trade them with partners. The UK’s strengths lie in radio chipsets, analog chips and test and measurement, which could anchor that trade.
Doubling the Welsh cluster
Hazel Hung, business development manager at CSconnected, said the South Wales compound semiconductor cluster it convenes, where chipmaking dates back to the 1980s, employs about 3,000 people and adds more than £500m in gross value added (GVA) to the UK economy. Those figures are set to double within five years.
“If the core semiconductor companies in South Wales are going to double, then there’s ultimately a risk to the supply chain that’s going to be left behind,” she said.
CSconnected ran a £1m supply chain development pilot funded by Cardiff Capital Region, offering grants of £100,000 to SMEs that supply the cluster directly. Pegasus Chemicals in North Wales, which makes specialist chemicals for chip manufacturing, used its grant to buy capital equipment to raise throughput, create jobs and keep more value in the UK.
In 2022, the UK government ordered Nexperia to divest Newport Wafer Fab. Hung said one company sharing the site lost its premises overnight, and the cluster helped it move into Cardiff University.
Seamus Carroll, head of the semiconductor unit at IDA Ireland, said companies weighing a new fab location ask three questions:
Can I set up and build here?
Can I grow sustainably here?
What is the location’s long-term trajectory?
“I think of them as equivalent to the cathedrals of the Middle Ages. They’re the modern-day equivalent,” he said of fabs.
Building one needs land with the right power and water, plus construction know-how. IDA Ireland, the country’s inward investment agency, estimates about 200 Irish firms have that experience, including installing extreme ultraviolet (EUV) lithography machines. Intel’s Fab 34 there cost €17bn, and Intel has since invested a further €5bn to support its Xeon 6 chips.
He said policy stability matters at that scale, noting that Ireland has kept a low corporate tax rate since the 1950s across successive governments. Europe also faces an estimated shortfall of 65,000 semiconductor workers by 2030.
Carroll said cross-border research offers a practical route for UK companies. Britain rejoined Horizon Europe, the European Union (EU) research program, in 2024 through Innovate UK, and a recent call targeted supply chain resilience. Ireland takes part in three of the five pilot lines set up under the EU Chips Act.
Hung said the UK lost much of its European collaboration through Brexit. CSconnected has since joined the Silicon Europe Alliance, but building consortia takes time and resources that many organizations struggle to spare.
The cluster is strong on graduates and PhDs but short of technician-level staff with level 3 to 5 qualifications. It reached 20,000 primary and secondary pupils last year, and students in Newport are taking Wales’ first semiconductor qualification, a General Certificate of Secondary Education (GCSE) equivalent.
“That’s the kind of intervention that needs to happen on a regular basis. It’s not going to be just a one-off,” she said.
“There are no courses in the UK for obsolescence management or resilience in the semiconductor industry,” Salmon said. “People like me who would like to retire with their grandchildren will not be here in 10 years’ time. All that knowledge will go with us. So we have to pass it down.”
Over the next year, Carroll wants a return on the roughly €460m Ireland has invested in semiconductor-related projects to date, while Hung wants less bureaucracy standing between UK industrial strategy funds and companies’ bank accounts.