The British government has confirmed that a promised a full national security review of the purchase of Newport Wafer Fab by a Chinese owned entity has begun.

In July 2021 it was revealed that Newport Wafer Fab (NWF), the UK’s largest largest chip producer, was to be acquired by Dutch chip firm Nexperia. Concern about that move centred over that Nexperia is owned by a Chinese chip firm Wingtech Technology.

The undisclosed purchase price of NWF was also said to be only £63 million ($87 million), which if accurate, is a very cheap price for an operational fab.

National security

Newport Wafer Fab is based in Newport, Wales, and it is a high volume 200mm wafer fab that makes silicon chips used in power supply applications for the car industry.

The fab has also been developing more advanced “compound semiconductors,” which are faster and more energy efficient.

NWF also makes the wafers that electronic circuits are printed onto.

Some of its work is also potentially sensitive as Newport Wafer Fab has over a dozen UK government research contracts.

Indeed, at least one of contracts involves developing chip technology for a radar system that would be used in fighter jets.

As soon as the Nexperia acquisition was announced last year, national security concerns were immediately raised by Tom Tugendhat MP, leader of the UK government’s China Research Group and chairman of the Foreign Affairs Select Committee.

Tugendhat at the time voiced his concerns that the UK was selling a prized asset to a Chinese-owned company, when there is a global chip shortage.

Just a couple of days after that concern was voiced, Prime Minister Boris Johnson ordered a review of the acquisition of Newport Wafer Fab.

At the time the Prime Minister asked his national security adviser (Stephen Lovegrove) to review the purchase of Newport Wafer Fab by Nexperia.

That was despite the Welsh secretary saying  he was “satisfied” that security risks had been taken into account, in answer to criticism from Labour and Conservative MPs.

Government review

But it seems the national security review requested by the Prime Minister never actually took place.

Until this week, that is.

The government announced on Wednesday that the “acquisition by Nexperia of Newport Wafer Fab has been called-in for a full national security assessment by Business Secretary Kwasi Kwarteng.”

Kwasi Kwarteng on Twitter said that while the UK welcomes overseas investment, it must not threaten Britain’s national security.

The government said it has powers under the National Security and Investment Act 2021 to scrutinise and – if necessary – intervene in qualifying acquisitions on national security grounds.

The government has 30 working days, which can be extended to an additional 45 working days to carry out that assessment.

The government confirmed that the review process is already underway.

Other interventions

The United Kingdom has in recent years moved on a number of other acquisitions of British firms by overseas entities, and subjected them to a national security review.

Two of the most notable concern technology firms.

In September 2021 the government ordered a national security review of the takeover of Swansea-based graphene maker Perpetuus Group by either Taurus International or Dr Zhongfu Zhou (who has business interests in China), or any enterprise associated with him or the company.

The government in November last year also ordered a full Phase two investigation of Nvidia’s $40 billion (£31.2bn) purchase of ARM Holdings, amid strong signs the British government would block the deal on national security grounds.

Regulatory concern was also expressed in the Europe and the United States, and such was the pressure on Nvidia, that in February this year the GPU powerhouse confirmed it was terminating its takeover of ARM, much to the relief of the tech industry as a whole.

The UK however is not the only country reviewing purchases by Chinese firms.

Last year South Korea launched a review after Beijing-based Wise Road Capital agreed a deal to buy semiconductor firm MagnaChip.

That deal was terminated in December 2021.

The Italian government also last year blocked Chinese firm Shenzhen Investment Holdings from acquiring a controlling stake in LPE, a Milan-headquartered semiconductor company.

Tom Jowitt

Tom Jowitt is a leading British tech freelancer and long standing contributor to Silicon UK. He is also a bit of a Lord of the Rings nut...

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