The UK government has called to review the acquisition of the country’s largest semiconductor plant, Newport Wafer Fab by Nexperia which is a Dutch subsidiary of Chinese company Wingtech as a result of a shift in approach to foreign takeovers.
The business secretary of the UK, Kwasi Kwarteng said that the country would review all its foreign investments and takeovers under the new National Security and Investment (NSI) Act.
He mentioned; “We welcome overseas investment, but it must not threaten Britain’s national security”
Moreover, the NSI Act of January 2022 allows greater scrutiny and inquiry of foreign investment in sensitive industries. Likewise, UK Prime Minister Boris Johnson has also asked the national security advisory board to re-evaluate the deal based on national security grounds.
However, the National Security Advisor, Stephen Lovegrove, concluded that there were insufficient reasons to block the deal on specific security grounds, given the company’s outdated technology.
On the other hand, many other senior officials have warned that the Chinese takeover of Newport Wafer Fab South Wales, which produces silicon wafers would undermine one of the country’s strategic industries.
The former head of the National Cyber Security Centre, Ciaran Martin, has expressed “very real concerns” about the purchase of the semiconductor chip company.
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Similarly, Tom Tugendhat, Tory Chair of the Foreign Affairs Select Committee was of the view that;
“We need to maintain a base to build on to ensure the UK is resilient. This isn’t just about security today but independence tomorrow. Good decision.”
The company, Newport Wafer Fab is one of the largest semiconductor companies known for making the components of electric vehicles and smartphones. It is estimated that Newport Fab along with other companies like IQE, SPTS Technologies and Microchip makes a “cluster” that generates the cluster is more than £600mn revenue annually. Additionally, the cluster employs around 2,000 people each year.
The UK government is indecisive about the deal due to the global shortage of microchips and the need to support domestic industries amidst Russia’s invasion of Ukraine. In addition to this, the government is also concerned for Arm Holdings, a Cambridge-based semiconductor, and software design company, which is likely to attract New York’s stock exchange.
However, the decision of blocking the deal with China could reduce the company’s shareholding back to the original which is 14%. Likewise, it will also increase unemployment as the company currently employs around 450 people.
Conclusively, the UK government perceives a threat from the growing Chinese economy and is considering reviewing its microchip deal to protect its national interests.