The UK government has blocked the takeover of Britain’s largest semiconductor maker by a Chinese-owned manufacturer, citing “a risk to national security”.
The business department’s decision on Wednesday comes more than a year after semiconductor company Nexperia first announced it had taken control of Newport Wafer Fab in south Wales in July 2021 in a £63million deal.
The company, now known as Nexperia Newport, makes chips used for power management in electronic devices. Nexperia is based in the Netherlands but is owned by the Chinese company Wingtech.
In its notice of the final order, the Department for Business, Energy and Industrial Strategy said the Secretary of State considered the national security risk to be “technology and know-how that could result from a possible reintroduction of compound semiconductor activities at the Newport site, and the potential of these activities to undermine the UK’s capabilities”.
BEIS also noted that “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 from participating in future projects involved that are relevant to national security.”
The decision will raise questions about the future of jobs for 550 workers at the Newport site, as well as 1,000 employees at a separate Nexperia facility in Stockport.
Nexperia’s UK boss Toni Versluijs told the Financial Times: “We are shocked by the decision. The employees are shocked too.
“We will keep fighting. We believe [the decision] is fundamentally wrong. We will appeal. We intend to reverse it.”
Nexperia Newport isn’t big by global chip manufacturing standards, with sales of £31 million in the last reported fiscal year, compared to £36 billion for Taiwan Semiconductor Manufacturing Company, the industry giant that makes cutting-edge chips. However, the takeover raised concerns about the future of the UK’s chip industry, some of whose products are used in defence, and its ownership of a company that could be influenced by a geopolitical rival.
Countries around the world have sought to bolster their domestic semiconductor industries amid concerns over reliance on manufacturers in Taiwan, which is claimed by China as its territory, and South Korea. The US plans to invest $52bn (£44bn) in its chip industry, while the EU has said it will invest €43bn (£38bn).
Kwasi Kwarteng, who was business secretary at the time ahead of a messy 38-day tenure as chancellor, in May ordered an investigation into the Nexperia takeover under the new National Security and Investment Act introduced earlier in the year. The government postponed the final decision until midnight on Wednesday in early July.
Tom Tugendhat, a vocal critic of the Chinese government who now serves as Britain’s security minister under Rishi Sunak, was among politicians urging the takeover be reviewed on security grounds.
The review prompted two British chipmakers to express interest in buying the company if Nexperia’s purchase was blocked. Ron Black, former CEO of Imagination Technologies, led a consortium that said it had pledged $300 million September.
Versluijs told MPs in July the company had no plans to move operations abroad. According to its own statements, it employed 380 people at the end of 2020.