By Alistair Smout and Kate Holton
LONDON (Reuters) -Britain will invest 1 billion pounds ($1.3 billion) in its semiconductor sector over the next decade as part of a long-awaited strategy that was immediately criticised by the industry for being too little to make a difference.
Chipmakers around the world have poured billions of dollars into the sector in recent years, with the United States and Europe backing the development of new plants after the COVID-19 pandemic showed the risk of relying on Taiwan and China.
Britain's plan, which has been in the works for around two years, is dwarfed by the $52.7 billion of U.S. chip subsidies and 43 billion euros ($47 billion) of proposed EU investment.
But it focuses on the area where Britain excels, the design of semiconductors, used in everything from cars to smartphones and washing machines. Prime Minister Rishi Sunak said it would help Britain build a "competitive edge on the global stage".
While companies in the sector welcomed publication of a strategy, they criticised the scale of support.
AI chip designer Graphcore said it was "modest" compared with countries such as Germany, while the head of graphene maker Paragraf said it was "flaccid".
"The UK's capital commitment is nothing but a rounding error in this industry," said Simon Thomas, CEO and founder of Paragraf, which describes itself as the only company in the world capable of manufacturing graphene to mass produce chips.
Under the new plan, some 200 million pounds of investment will be available in 2023-25, rising to up to 1 billion pounds in the next decade. While it is focused on research and design for now, Britain said it would support investment in chip manufacturing later this year.
Citi analysts described the focus as "sensible" but the money as "too little to be of significant value to major industry partners".
Sunak, in Japan for a Group of Seven (G7) leaders, also announced a semiconductors partnership with Tokyo, echoing an agreement with South Korea.
Britain is home to Arm, which designs the processor technology used in nearly every smartphone, selling intellectual property to companies such as Apple and Qualcomm.
It was sold to Japan's SoftBank in a 2016 deal that sparked criticism that Britain had allowed its biggest tech success to be bought by foreign investors. SoftBank now plans to list it in the United States.
Business leaders have become increasingly critical of Britain's strategy in recent months, saying they need joined-up support on everything from infrastructure to skills training and investment as they transition to a post-carbon future.
A report by a panel of lawmakers said last year that a lack of an end-to-end supply chain for semiconductors made Britain particularly exposed to any future disruption to chip supplies, such as if China were to invade Taiwan, the world's biggest semiconductor supplier.
($1 = 0.7923 pounds)
($1 = 0.9084 euros)
(Reporting by Alistair Smout and Sachin Ravikumar; Editing by Alexander Smith)