UK opens national security probe into 2021 sale of local wafer fab to Chinese company

Government has power to unwind transactions such as sale of Newport facility to China-controlled Nexperia

The UK’s Department for Business, Energy & Industrial Strategy has commenced a full national security assessment of Newport Wafer Fab’s acquisition by China-controlled entity Nexperia.

The Fab is the UK’s largest chipmaking facility and produces up to 32,000 wafers a month. In August 2021 it was acquired by a Dutch outfit named Nexperia that is controlled by Chinese company Wingtech.

Issues including global semiconductor shortages demonstrating the importance of sovereign capacity, the many credible accusations that Chinese firms practice industrial espionage, China’s desire to become self-sufficient in semiconductors, and general China-related security concerns all made the sale a hot political issue. So hot that when news of the sale emerged, UK prime minister Boris Johnson promised a national security assessment, overriding business secretary Kwasi Kwarteng who had previously said the deal wasn’t worthy of a probe.

We welcome overseas investment, but it must not threaten Britain's national security.

The job of reviewing the sale was given to UK National Security Advisor Sir Stephen Lovegrove, who in December 2021 – four months after the deal was done – advised the UK’s Foreign Affairs Committee that the transaction was under review without offering any details of the investigation.

The matter reared its head again in April 2022, with publication of a House of a Foreign Affairs Committee report titled Sovereignty for sale: follow-up to the acquisition of Newport Wafer Fab.

That report’s damning conclusion was that Sir Stephen’s review had not functionally commenced. That assessment again made the sale a political problem for the government.

Which brings us to Wednesday when business secretary Kwasi Kwarteng announced a review of the deal will take place.

That news came on the same day as a report on boozy parties attended by government figures in defiance of COVID-19 lockdown orders. That report is far more politically significant than the announcement of a review into the sale of a chip factory.

Kwarteng’s tweet, and his department’s announcement of the review, omit substantial detail on the terms of the probe.

The departmental announcement notes that the National Security and Investment Act 2021 gives the UK’s government the power to intervene in qualifying acquisitions on national security grounds.

In the opinion of law firm Winckworth Sherwood, those powers extend to unwinding a transaction.

Exercising that power may not fit in with the UK’s post-Brexit stance that it is open for business.

The review could also find that the Newport Fab isn’t that important. It builds to a 200nm process, tech that’s handy for silicon staples but is a long way from the leading edge. ®

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