The government has ordered Chinese-owned technology firm Nexperia to sell at least 86% of its stake in Newport Wafer Fab (NWF) on grounds of national security.
In an order [PDF] published on Wednesday, Secretary of State for Business, Energy and Industrial Strategy (BEIS) Grant Shapps explained that there was a risk to national security related to the know-how and technology that could result from activities involving compound semiconductors at the site, as well as the potential for those activities to odd British capabilities.
The location of the facility could also make it easier to obtain technical know-how in South Wales and make it more difficult for that area to participate in future initiatives that are vital to national security, the order said.
The Dutch-based Nexperia organization released a statement, criticizing the decision. The company said it disagreed with the UK government order’s assertions on national security, adding that two prior security evaluations had not found any issues with national security that would warrant blocking the deal.
“We are genuinely shocked. The decision is wrong, and we will appeal to overturn this divestment order,” Nexperia’s UK country manager, Toni Versluijs, said.
Nexperia said it offered BEIS’s Investment Security Unit comprehensive remedies that fully addressed even these potential concerns.
A commitment not to undertake the compound semiconductor activities of potential concern and to give the UK government direct oversight and involvement in the administration of Newport was one of those remedies.
Nexperia said the UK government has entirely ignored all the remedies proposed.
Nexperia is a subsidiary of Wingtech Technology, a Chinese firm that receives partial funding from the Chinese government. Nexperia acquired NWF, Britain’s biggest microchip factory, last year for £63 million.
Nexperia previously held a 14% stake in NWF, but in July 2021, it increased its stake to a 100%.
After the deal was announced, government officials and lawmakers voiced concern that the UK was selling a prized asset to a Chinese-owned company at a time of global shortage in semiconductor chips.
In May, the government launched a thorough investigation into the Nexperia deal in accordance with the newly enacted National Security and Investment (NSI) Act that allows the government to review and block foreign takeovers or investments.
One of the MPs calling for the deal to be examined on security grounds was Tom Tugendhat, a strong opponent of the Chinese government who is now the UK’s security minister under Rishi Sunak.
With a monthly production rate of over 32,000 silicon wafers, NWF operates Britain’s biggest chipmaking plant.
The decision made by the government might further sour ties between the UK and China, which are already at a low point as a result of measures taken by London to ban Huawei 5G technology.
The UK has previously investigated the American semiconductor giant Nvidia’s proposed acquisition of Arm Ltd, a British chip design firm, over national security concerns.
The American firm said in February that it decided not to move forward with the acquisition ‘because of significant regulatory challenges preventing the consummation of the transaction’.