Cancel China’s Purchase of UK Computer Chip Fab

July 5, 2021 Updated: July 5, 2021

Commentary

China is about to acquire ownership of Britain’s largest computer chip design and manufacturing facility (known as a “fab”) for the low price of $87 million this week, according to CNBC sources. As is typical in such deals, Beijing seeks control over the fab, and as much of its technology as possible, through gradualism and layers of front companies. In selling the fab, the UK is not living up to its responsibilities as a democratic ally.

“This transaction highlights the need for the UK to more closely coordinate investment reviews with the U.S. to align our security interests,” wrote Michael Wessel, Commissioner on the U.S.-China Economic and Security Review Commission, in an email. “The UK needs to be a strong partner in addressing China’s efforts to dominate critical supply chains.”

British allies, like the United States, Italy, and South Korea, all of which have put the breaks on fab sales to China, cannot alone defeat China’s attempts to obtain sophisticated computer chip technology. Only united, with Britain standing firm against China’s tech acquisitions, can we defeat the regime’s predatory practices.

Chinese-owned Nexperia, a Dutch company, seeks to buy the British chip company, called Newport Wafer Fab (NWF). The price sounds low, as Texas Instruments announced its purchase of a vacant Micron manufacturing plant in Utah for $900 million this week. The UK plant will give China access to not only manufacturing, but a platform in Britain from which it can acquire top British talent and technology for cutting-edge chip design.

Computer chip technology, which is closely held as a strategic national asset in most countries, will determine the future military and economic competitiveness of China, as it is one area in which the totalitarian country lags. Once China is no longer dependent upon the United States and allies for computer chips, it can put the squeeze on us in other ways, without any fear of retaliation. China tried and failed to put a rare earth elements (REE) squeeze on Japan in 2010, and failed. As China increases its hold on additional industrial resources, including chip technology and manufacturing, its ability to displace Britain and its allies in the global chip market, and then deny those chips to the allies, will increase. Thus, Britain’s sale of NWF to China is enabling the totalitarian country’s future ability to impose draconian economic coercion upon us all.

The NWF sale should therefore be canceled by the British government for national security reasons.

Nexperia, the Netherlands-based company seeking to purchase the British fab, is 100 percent owned by Wingtech Technology, a Chinese company. In March, Nexperia acquired NWF board seats. NWF, which is Britain’s top 200mm silicon and semiconductor development and manufacturing facility, is highly valuable given the global chip shortage and race by the United States, Taiwan, South Korea, and China to stay ahead in the production and miniaturization of chips through protected technologies such as that required for the iPad Pro, which uses a highly-coveted 3 nanometer lithography manufacturing process.

NWF specializes in chips used in automobiles, and chip shortages have highly impacted automobile assembly lines this year. GM, Mercedes, Peugeot, Porsche, Volkswagen, and other manufacturers have had to stall production lines, or offer lower-tech options such as analog speedometers, in their vehicles. Britain currently manufactures over fifty vehicle models by over fifteen different manufacturers, any of which could be impacted by artificial chip shortages imposed by China, if China acquires cutting-edge chip technology and manufacturing processes.

A June 18 letter from Britain’s Chair of the Foreign Affairs Committee, Minister of Parliament Tom Tugendhat, sent to Britain’s Secretary of State for Business, Energy and Industrial Strategy, Kwasi Kwarteng MP, took issue with the latter’s failure to recommend review of the NWF sale under Britain’s National Security and Investment Act. Tugendhat called the Chinese takeover of the British company “a significant economic and national security concern” and appealed to the need for “self-sufficiency in semiconductor supply chains as a national security imperative.”

Confusing matters is the devolved nature of governance in the United Kingdom, which since 1922 has been divided into the semi-autonomous (and potentially secessionist) “countries” of England, Scotland, Wales, and Northern Ireland. MP Tugendhat’s letter reflects the relative weakness of Britain’s government in London when it states, “Could you also please clarify whether you believe this is primarily a matter for the Welsh Government when the administration in Cardiff [the capital city of Wales] does not have the devolved authority to consider the national security implications that a transaction of this nature to a foreign purchaser would raise?”

Support for Welsh independence from Britain increased from less than 20 percent in 2016 to above 30 percent in 2021 polls, possibly putting pressure on London to placate Welsh business interests, including those that seek business with China. While sentiment in Wales is still well below the threshold for independence, one of the Welsh parties in 2020 did table a motion in the Welsh parliament on Welsh independence. In 2014, Scottish voters defeated an independence referendum that its proponents billed as a “once-in-a-generation” opportunity. Despite their loss, they are back at it in 2021 with proposals for another independence referendum that would allow Scotland to separate from the United Kingdom in order to stay in the European Union post-Brexit. Another Scottish independence referendum would require agreement by London, which the Conservative government is unlikely to grant. But secessionist pressures make it more difficult for London to take strong measures against businesses in Scotland and Wales that seek to sell technology to China.

In the context of this secessionist confusion in Britain, Tugendhat is rightly trying to unify his country and more closely align its defense with other democracies. In a case of allied coordination on the review of sensitive technology exports, Tugendhat’s letter notes that the Commission on Foreign Investment in the United States (CFIUS) cooperated with the South Korean government on reviewing a similar attempted Chinese purchase of a chip fab, this time by Beijing’s Wise Road Capital of South Korea’s Magnachip. The South Korean government, unlike the British government, categorized its chip company as a “national core technology,” thus making the review mandatory. In March, Italy blocked the sale to a Chinese company obtaining a controlling stake in LPE, a Milan chip fab, calling the Italian company of “strategic importance.”

NWF has about $53 million in debt, including to HSBC and the Welsh government. While the company’s design work in faster and more energy-efficient compound semiconductors will not be included in the proposed sale, NWF under Chinese control could still redevelop these technologies using British talent and technology, as well as the development processes that remain at NWF. Britain’s talent and technology will be at Beijing’s fingertips if the NWF sale goes through. Since NWF has already made progress in inventing the compound semiconductor wheel, it won’t be difficult for the sold-out portion of NWF to do so again even if that wheel has officially spun off to China.

The sale of NWF should be canceled immediately, as it gives Beijing an important toehold in British high-technology manufacturing and design. Given efforts by Britain’s allies the United States, Taiwan, South Korea, and Italy, to secure chip technology from the predatory economic practices of China, it would be a failure of Britain’s alliance with other democracies for it to undercut these efforts by selling strategic technologies to China. Considered along with the global chip shortage, it is ludicrous for Britain, against its own interests and those of British vehicle manufacturers, to put the country’s strategic chip manufacturing facilities at risk by yielding control to Beijing. The NWF fab gives Britain some measure of assured supply, and must not be yielded to a militaristic and economically predatory adversary whose proclivity to theft and unscrupulous trade practices, such as dumping and political withholding of key economic resources, is well known.

Anders Corr has a bachelor’s/master’s in political science from Yale University (2001) and a doctorate in government from Harvard University (2008). He’s a principal at Corr Analytics Inc., publisher of the Journal of Political Risk, and has conducted extensive research in North America, Europe, and Asia. He authored “The Concentration of Power” (forthcoming in 2021) and “No Trespassing,” and edited “Great Powers, Grand Strategies.”

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

Anders Corr
Anders Corr
Anders Corr has a bachelor's/master's in political science from Yale University (2001) and a doctorate in government from Harvard University (2008). He is a principal at Corr Analytics Inc., publisher of the Journal of Political Risk, and has conducted extensive research in North America, Europe, and Asia. He authored “The Concentration of Power” (forthcoming in 2021) and “No Trespassing,” and edited “Great Powers, Grand Strategies.”