UK Government to Probe Chinese Takeover of UK’s Largest Microchip Factory

By Peter Simpson
Peter Simpson
Peter Simpson
Peter Simpson is a British journalist who has worked for major international news media and spent a decade covering China from Beijing, including the 2008 Beijing Olympics, during which he broke many exclusives. He is interested in all facets of the Sino-UK relationship and geopolitics. Other interests include sport, business, culture, and travel.
May 26, 2022 Updated: May 27, 2022

The acquisition of Britain’s biggest microchip factory by a Chinese-owned technology company is to face a full national security assessment.

After weeks of pressure from politicians and concerns issued from Washington, the UK’s Business Secretary Kwasi Kwarteng confirmed the government would examine whether the takeover of Newport Wafer Fab by Nexperia, a subsidiary of the Chinese smartphone manufacturer Wingtech Technology, would pose a threat to national security.

“There will now be a full assessment under the new National Security and Investment Act,” announced Kwarteng on Twitter.

He added, “We welcome overseas investment, but it must not threaten Britain’s national security.”

Netherlands-based Nexperia inked a £63 million ($80 million) deal last year to acquire Newport Wafer Fab, which is located in south Wales and makes silicon wafers.

Initially, the government concluded after a probe in March by the UK’s national security adviser there were insufficient reasons to block the deal because it was believed the company produced outdated technology.

But with multiple contracts with the UK government, including defence-related projects, the government has been forced to investigate the deal again.

The sale of Britain’s biggest microchip plant, which employs 450 staff, to the Chinese drew ire and disbelief inside the UK and elsewhere, especially from across the Atlantic where nine U.S. congressmen, including the lead Republican on the House Foreign Affairs Committee, Rep. Michael McCaul (R-Texas), signed a letter last month demanding “urgent action” by the UK government to overturn the acquisition.

The takeover “serves as a critical test case” of Britain’s willingness to “address a shared security concern regarding critical technology” their letter said.

Global Shortage

Investment screening specialist Datenna, which carries out research on Chinese investments and acquisitions for governments, found during an analysis of Wingtech’s shareholders that the company—founded by CEO Zhang Xuezheng, also known as Mr. Wing—was heavily backed by the Chinese Communist Party.

The Datenna report cited the Chinese state-owned Assets Supervision and Administration Commission of the State Council, as well as specific Chinese regime-run semiconductor investment funds.

Added to the anxiety is the ongoing global shortage of computer chips which has been exacerbated by pandemic-related lockdowns.

They’re so important to modern manufacturing, semiconductors are regarded as an vital strategic asset.

The new investigation is the first under the National Security and Investment Act, which came into force in January.

The government now has the power to intervene, including retrospectively, in acquisitions on national security grounds, and has 30 working days to carry out its assessment.

It could force the company to reduce its shareholding back to the 14 percent it originally owned.

Last year, Prime Minister Boris Johnson said he did not want to drive Chinese investment away from Britain because of an “anti-China spirit.”

But increasing fears that Chinese state-backed companies were acquiring key parts of Britain’s infrastructure and national assets, and amid a political and public backlash over Beijing’s human rights—including the clampdown in Hong Kong—and aggressive economic expansionism, has forced a wholesale rethink of the UK–Sino relationship.

Peter Simpson is a British journalist who has worked for major international news media and spent a decade covering China from Beijing, including the 2008 Beijing Olympics, during which he broke many exclusives. He is interested in all facets of the Sino-UK relationship and geopolitics. Other interests include sport, business, culture, and travel.