The boss of one of the UK's leading microchip firms is calling for the government to invest "hundreds of millions" in the sector.
Millions of products from cars to washing machines and mobiles rely on microchips also called semiconductors.
Scott White, of Pragmatic Semiconductor, said without a huge funding boost UK firms will go abroad.
The government said it would soon publish its strategy to improve access to skills, facilities and tools.
It comes as a new report says the UK government "must act now to secure the future of the vital UK semiconductor industry".
Mr White, Pragmatic's chief executive, said the government "can't just spend a few tens of millions of pounds" on the semiconductor sector, as "that isn't enough to move the needle".
"It has to be hundreds of millions, or even more than £1bn, to make a substantive difference," he said.
"It is not about unfair subsidies, it is about having a level playing field with other countries around the world."
Mr White said that other governments were "investing substantially" in their microchip industries, and that the UK had to follow suit.
Pragmatic Semiconductor employs 200 people across its headquarters in Cambridge and at two production sites in Country Durham.
Mr White added that while the company wanted to keep manufacturing in the UK, "that only makes sense if the economies are justified compared to elsewhere".
A joint report published on Thursday by the Institute of Physics (IOP) and the Royal Academy of Engineering (RAE) found "skills shortages, high costs and low public awareness threaten the UK's position in the vital semiconductor race".
The study follows a global shortages of microchips in recent years temporarily halted production of everything from games consoles to cars.
The IOP and RAE are calling for financial support for the sector in the UK.
They also want to see more children encouraged to study sciences at school, to help increase the number of qualified potential employees, and highlighting the importance of the sector.
The report - entitled UK Semiconductor Challenges and Solutions - also calls for the government to release its long-awaited national semiconductor strategy. This has now been two-years in the making.
The IOP's director of science, innovation and skills, Louis Barson, said the UK cannot simply rely on importing the microchips it needs.
He said: "We need a strong homegrown semiconductor industry, and that is critical to our economic security and physical security."
