Chinese takeover of Newport Wafer blocked by British regulators
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The UK government has blocked the sale of British chip manufacturer Newport Water Fab to a Chinese-owned company on national security grounds.
UK Business Secretary Grant Shapps has ordered Nexperia to sell its majority stake in Newport Wafer Fab, the Welsh semiconductor firm it acquired for £63m.
Nexperia is based in the Netherlands but owned by Wingtech, a company partially backed by the Chinese government and listed in Shanghai. In July 2021, the firm completed its acquisition of Newport Wafer Fab, after purchasing 86 per cent of company shares, in addition to the 14 per cent it already possessed.
The firm subsequently changed its name to Nexperia Newport Limited, or NNL.
Earlier this year the UK government launched a national security probe into the deal, using powers that allow it to review and block foreign takeovers or investments in sensitive sectors.
The government said yesterday (Wednesday, 17 November) that the location of the Newport facility led to the view that the takeover was a national security concern.
“Following a detailed national security assessment, the Business Secretary has decided to issue a Final Order requiring Nexperia to sell at least 86 per cent of Newport Wafer Fab to prevent against potential national security risks," the government said in a statement.
“The National Security and Investment regime enables us to continue championing business and open investment, whilst protecting national security.
“The UK has a number of strengths within the semiconductor sector, including in South Wales, and through our forthcoming semiconductor strategy we will enable this technology to continue to support the UK and global economy.”
In the Final Notice Order, Shapps stated that he considers there is a risk to national security relating to “technology and know-how that could result from a potential reintroduction of compound semiconductor activities at the Newport site, and the potential for those activities to undermine UK capabilities”.
“The location of the site could facilitate access to technological expertise and know-how in the South Wales Cluster (‘the Cluster’), and the links between the site and the Cluster may prevent the Cluster being engaged in future projects relevant to national security,” he added.
Newport Wafer Fab runs Britain’s largest chipmaking facility, producing some 32,000 silicon wafers each month.
In the midst of a global semiconductor shortage that has forced companies such as Ford, Jaguar Land Rover, BMW, Renault and Toyota to shut factories, scale back production and exclude high-end features, the 2021 news of the Nexperia deal saw government officials and lawmakers raising concerns that the UK was selling a prized asset and giving China a significant competitive advantage.
The China Research Group of Conservative MPs said: “Our long-term security relies on the resilience of our economy and that means ensuring we don’t allow strategic assets to fall into the hands of authoritarian powers for the sake of short-term advancement.
“I’m sure many will be relieved that we aren’t handing over critical security infrastructure to a company with well documented links to the Chinese state."
Toni Versluijs, Nexperia’s UK country manager, said the decision was wrong and that the company plans to appeal.
“We are genuinely shocked,” he said in a statement. “The decision is wrong, and we will appeal to overturn this divestment order to protect the over 500 jobs at Newport.”
In 2020, the UK government ordered telecoms equipment from Chinese tech giant Huawei to be stripped out of the UK’s 5G network by 2027, and it has investigated other large acquisition deals, such as Nvidia's proposed purchase of chip design company Arm, over similar national security concerns.
Last month, the UK’s Government Communications Headquarters (GCHQ) warned against China's strategy of using technology to increase its global influence and “gain advantage through control of their markets, of those in their sphere of influence and of their own citizens”.
E&T has analysed the ramifications for the world’s largest chipmaker and many other leading semiconductor stocks, as they suffered from the first major reaction to new restrictions on US exports to China.
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