South Wales is looking to become a major European semiconductor industry cluster following the official ratification of a £37.9m deal to help local firms working on the technology.

As a result of the deal, the region will seek to attract £375m in private investment, create 2,000 jobs, and become a global leader in developing compound semiconductor-enabled applications.

Compound semiconductors are an essential component of many of the devices we use today, such as WiFi and smartphones. Compared to silicon technology they offer lower power consumption, higher operating speeds and temperatures, as well as light-emitting and detecting properties, which can benefit technologies such as driverless vehicles, 5G and the Internet of Things.

The deal is the first investment under the £1.2bn Cardiff Capital Region city deal programme.

Councillor Peter Fox, leader of Monmouthshire County Council, commented: “It has the potential to place our region at the heart of this cutting edge sector and will require the development and integration of a compound semiconductor supply chain in South Wales, with the economic and social benefits that will bring.”

Welsh Secretary Alun Cairns said the deal could “be a catalyst to getting the scientists and engineers, the designers and the entrepreneurs together to make it happen”.

Cardiff-based IQE plc will take over the lease to produce compound semiconductors and applications, and has been collaborating with researchers and students at Cardiff University to work on innovations.

Beyond Newport and Cardiff, there is hope the deal will open the door to other sophisticated technology firms setting up in other parts of the region.