UK blocks Chinese-led buyout of biggest microchip factory over national security concerns

Britain's decision to undo Wingtech's acquisition of Newport Wafer Fab shows increasing hostility to Chinese investment in the country. PHOTO: REUTERS

LONDON - Britain ordered China’s Wingtech Technology to undo its acquisition of Britain’s biggest microchip factory more than a year after the deal closed, citing national security concerns.

Wingtech’s Dutch subsidiary Nexperia Holding will be forced to sell the 86 per cent of Newport Wafer Fab in Wales it bought in July 2021 in a deal worth about £63 million (S$103 million), a person familiar with the matter said at the time. It held a small stake before that date, prior to the new United Kingdom takeover rules.

Business Secretary Grant Shapps saw a risk to national security from “a potential reintroduction of compound semiconductor activities” at the site, referring to advanced chips used in applications such as electric vehicles, “and the potential for those activities to undermine UK capabilities”, according to the order published late on Wednesday.

The site’s importance to the so-called cluster of related business and research in south Wales was also a factor, the statement said.

It is the second Chinese takeover blocked by Britain’s new National Security and Investment Act, which came into force in January, and it is the first retrospective rejection of a deal. The decision shows increasing hostility to Chinese investment in the country after then Business Secretary Kwasi Kwarteng vetoed a Hong Kong-based firm’s acquisition of an electronic design company in August.

Possible buyers for Newport Wafer Fab may be waiting in the wings, including a consortium led by Mr Ron Black, the former chief executive officer of British chip design firm Imagination Technologies Group.

In an e-mailed statement, Nexperia said it was “shocked” by the decision, did not accept the national security concerns raised and would appeal to overturn the order. The company added that the government had not engaged with it or its proposed remedies, such as offering British officials direct control and participation.

“This decision sends a clear signal that the UK is closed for business,” said the company’s UK manager Toni Versluijs.

Newport Wafer Fab makes silicon wafers on which microchips are etched. These chips are assembled in Asia and are largely used in simple applications like power switches, many of which go into cars. The facility has passed through a series of international owners since it was founded in 1982 and was bought by Nexperia in 2021 from former manager Drew Nelson.

Part of the controversy concerned the company’s largely unused facility at the site, which was at one point set to become the nucleus for more sophisticated “compound” chips used in technology such as facial recognition, 5G and electric vehicles. Since the deal, Newport makes chips only for its Chinese owner’s needs and has said it would need a viable business plan to prepare the facility to make the compound semiconductors. BLOOMBERG

Follow ST on LinkedIn and stay updated on the latest career news, insights and more.