The UK intends to purchase AI chips from domestic companies to prevent them from relocating to the US.

      **TL;DR** The UK government plans to make "strategic purchases" of AI chips from British companies to retain them within the country. Technology Secretary Liz Kendall aims to develop a £37 billion chip industry with a 5% share of the global market.

      The UK government is set to directly purchase AI chips from British tech firms to ensure they remain in the country. At London Tech Week, Technology Secretary Liz Kendall will present plans for these "strategic purchases" of semiconductor equipment from UK-based companies, according to a report by the Telegraph. This initiative includes access to taxpayer-backed funding and investment in skills to keep the workforce in Britain.

      This announcement is part of a larger AI hardware strategy aimed at capturing 5% of the global chip market, potentially generating around £37 billion in revenue and creating tens of thousands of jobs. The government has already allocated £100 million via ARIA’s scaling compute programme, which includes £50 million designated for a scaling inference lab where British startups can test and validate their hardware.

      The necessity for this initiative is evident, as the UK continues to lose its top chip companies to foreign acquisitions. For instance, SoftBank purchased Graphcore in 2024, while Qualcomm acquired Alphawave IP for $2.4 billion last year. In 2023, Arm, the UK's leading chip designer, opted for a New York listing. Each of these exits has diminished the UK's ability to sustain its semiconductor industry.

      "This technology is too critical to rely entirely on other nations, particularly in sectors such as defense, financial services, and healthcare," Kendall remarked in a January speech at Bloomberg when she announced £1 billion in funding to enhance the UK's AI research computing capacity twenty-fold.

      The strategic chip purchases would position the government as a buyer, not just a regulator, ensuring guaranteed demand for British firms. Six UK companies have already been granted access to government-funded supercomputers to progress their AI models, with the government retaining a right of first refusal for future investments. Fractile, a British inference chip startup that recently secured $220 million and is reportedly in discussions with Anthropic, is among the firms this strategy seeks to support.

      These plans also address concerns about foreign dependency in government procurement. A recent parliamentary report cautioned against allowing US firm Palantir to have a significant presence in the UK public sector and noted a rising reliance on Microsoft and AWS. The HMRC’s £175 million AI contract with London-based Quantexa was an early indication of the government’s preference for domestic suppliers.

      Whether the strategic purchases alone can prevent another Graphcore from being sold overseas remains uncertain. The UK has the engineering talent and research capabilities but lacks the domestic demand and patient capital to foster the growth of companies locally, instead of selling to SoftBank or Qualcomm at the first substantial offer.