Dhe British Department of Commerce has blocked the takeover of the largest microchip factory on the island by a Chinese state-affiliated company. The decision followed a four-month government review under the new National Security Law. It is justified with the risk that “technology and know-how” could flow out if the factory were to develop new compound semiconductors. Now the Chinese group Wingtech has to sell the 86 percent stake in Newport Wafer Fab in Wales that it acquired last year.
The Chinese had bought the entire chip factory through their Dutch subsidiary Nexperia in July 2021. Previously, they were a minority shareholder with 14 percent. Nexperia paid 63 million pounds (about 72 million euros) for the remaining 86 percent. The factory in Wales produces around 200,000 silicon wafers a year for electronic systems that are built into coffee machines or car windscreen wiper controls and employs a good 500 people in Newport.
Nexperia was outraged by the London government’s decision. Country manager Toni Versluijs said: “We are really shocked. The decision is wrong. We will appeal to reverse this divestment order.” Nexperia’s CEO Xuezheng Zhang is also trying to apply pressure behind the scenes. Nexperia operates another factory with 1,000 employees near Manchester.
During and after the corona pandemic, there were global bottlenecks and delivery problems for the microchips, which are a central component of all electronic devices. The chips manufactured in South Wales are based on older technology, but the government nevertheless feared that high-tech know-how could flow out of the Wales cluster. Nexperia is a leading mass producer of chips. The company employs a total of 14,000 people. Wingtech Technology of China, one of the largest chip makers for the smartphones that produces for Huawei Technologies and Xiaomi Corp, took control of Nexperia in 2019 for more than 5 billion dollars. A third of the shares in Wingtech are said to be under the control of the Chinese state.
Between 2018 and 2020, the Newport Wafer Fab (NWF) made losses in the one to two-digit million ranges and was threatened with bankruptcy. The factory was set up in the early 1980s by what was then the semiconductor company Inmos, which received large public subsidies. On an international scale, the NWF is a small fish. According to the last annual report, it only made just over £30 million in sales. For comparison: The global market leader Taiwan Semiconductor Manufacturing Company ( TSMC ) had sales of over 70 billion dollars in the 2021/2022 fiscal year. Nexperia had just over $2 billion in sales in 2021.
The row over the takeover of the relatively small Newport plant is now symptomatic of London’s new, more critical approach to judging Chinese tech companies. London has decided that Huawei will withdraw from the construction of the 5G mobile network. Already installed parts are removed again. However, there are also critical voices in the UK who question what the future of the chip industry should look like if investors with a Chinese background are excluded.