UK’s largest chip plant acquired by Chinese-owned Nexperia

Nexperia – a customer of NWF’s foundry services – became its second-largest shareholder in 2019. It has now completed the transaction to obtain 100 per cent ownership of the semiconductor production facility, the UK’s largest. NWF will be renamed Nexperia Newport.

NWF is mainly based in Wales, with smaller manufacturing operations in Manchester and Hamburg. The fab was first built for Inmos in 1982 to manufacture transputers. It became NWF in 2017 and has received government backing as part of an effort to develop south Wales as a hub of expertise in compound semiconductors, which are faster and more energy efficient.

When NWF recently failed to meet certain conditions of its supply contract with Nexperia, its partial owner exercised its right to appoint board directors and hence guide the direction of the company.

The Newport site produces over 35,000 200mm wafer starts per month, covering a wide range of semiconductor technologies. Its chips are used in power supply applications for the automotive industry, which has been struck hard by the ongoing chip shortage.

Although financial details of the deal were not disclosed, CNBC reports that it is worth approximately £63m. NWF’s outstanding debts, including £20m with HSBC and £18m with the Welsh government, will be paid off following the sale.

CNBC quoted a Forrester analyst, who said: “A £63m price tag for a wafer fab is miniscule. Most wafer fabs cost well over £1bn. Even if this is older tech, this deal is ridiculously cheap.” By comparison, last week Texas Instruments announced it would purchase a Micron factory in Utah for $900m (£650m).

Nexperia said that it would “continue to have a strong position in the Welsh ecosystem and technology development and will secure the current jobs at the Newport site”. Under new ownership, it will help Nexperia meet soaring demand for chips and enrich its analogue, power and mixed signal capacity.

Achim Kempe, chief operating officer, Nexperia, said: “We are very excited to include Newport as part of our global manufacturing footprint. Nexperia has ambitious growth plans and adding Newport supports the growing global demand for semiconductors. The Newport facility has a very skilled operational team and has a critical role to play to ensure continuity of operations. We look forward to building a future together.”

Paul James, managing director at the Newport site, added: “The acquisition is great news for the staff here in Newport and the wider business community in the region as Nexperia is providing much-needed investment and stability for the future. We are looking forward to becoming part of the global Nexperia team and are keen to keep the current workforce. Additional local resources may be required, too. We are also pleased that we will be able continue to contribute to the local ecosystem.”

Under the terms of the deal, former NWF CEO Drew Nelson is reported to be in a position to spin off the compound semiconductor part of the foundry, retaining the NWF brand. Nelson commented: “The change in ownership of the Newport site marks an important step for the future of the facility as well as for the region. We are pleased that we are able to maintain the expertise in developing high-end silicon devices in the 200mm wafer fab while at the same time opening up opportunities for us to add new semiconductor technologies”.

News of the acquisition has been met with criticism that the UK government is not interfering in the sale of the largest British chip foundry to a Chinese-owned company during a global chip shortage.

Tom Tugendhat, chair of the Foreign Affairs Select Committee and China hawk, told CNBC he was surprised the purchase is not being reviewed under the new National Security and Investment Act, which tightens rules around foreign investment in strategically important UK industries and makes it easier for the government to block deals which may pose a national security risk.

In January, an investigation was launched into the acquisition of Nvidia’s $40bn bid for Cambridge-based Arm, which designs the industry-standard chip architecture found in all categories of devices.

“Having been in touch with partners in the US and around the world, I know I am not alone [in having these concerns],” Tugendhat said. “The semiconductor industry sector falls under the scope of the legislation, the very purpose of which is to protect the nation’s technology companies from foreign takeovers when there is a material risk to economic and national security.

“When the UK signed the Carbis Bay G7 communique, we pledged to take steps to build economic resilience in critical global supply chains, such as semiconductors. This appears to be an immediate and very public reversal of that commitment.”

Earlier this month, South Korea launched an investigation after Beijing-based Wise Road Capital closed a deal to buy semiconductor firm MagnaChip, describing semiconductors as a “national core technology”. In March, Italy blocked Shenzhen Investment Holdings from acquiring a majority stake in Milan-headquartered semiconductor company LPE, calling the sector one of “strategy importance”.

A Welsh Government spokesperson said: “Today’s announcement will secure 400 jobs and will see a further significant investment being made in the facility, including in new equipment to grow the business. As part of this, the Welsh Government will recover its initial investment, plus interest. Issues of Chinese ownership are a matter for the UK Government.”