Tech Investors Mull Newport Wafer Fab Rescue Bid – Report

Amid a national security review, British chip executives are reportedly preparing a rescue bid for Welsh chip firm Newport Wafer Fab

A fresh twist in the fate of Newport Wafer Fab has emerged this week, amid reports that British chip executives are developing a rescue plan for it.

According to the Daily Telegraph, a new fund aimed at supporting the UK’s chip sector has declared it would be willing to invest in the UK’s largest maker of chips.

The fund’s founders are also reportedly in contact with the former chief executive of Imagination Technologies (Ron Black), who is reportedly poised to launch a bid for the Welsh chipmaker.

Rescue bid?

It should be remembered that Imagination Technologies was purchased in 2017 for £550m by Cayman Islands-based private equity firm, Canyon Bridge, which is backed by Chinese state-owned China Reform Holdings.

Now there seems to be a determination to key another British firm out of foreign hands, and a rescue bid is being readied for Newport Wafer Fab.

Alex Stewart, co-founder of Headlight Technology Partners, a newly formed investment fund, was quoted by the Telegraph as saying: “Definitely, we would want to try and be part of helping Newport Wafer Fab.”

Headlight Technology Partners is reportedly in talks to raise up to £500m, which it will use across a range of investments.

The fund is in contact with Ron Black, who is reportedly is prepared to step in and support Newport Wafer Fab if its sale to Nexperia falls through.

Black is understood to have £300m of funding earmarked to buy and grow the factory.

“We know Mr Black is supportive of what we are doing” and said they had a “mutual desire to help UK PL,” Stewart reportedly said.

“Headlight is pulling together a significant fund and as we have the same passion for helping the UK to excel in semiconductors, we have been in discussions as to the best way to collaborate,” Ron Black reportedly said.

Stewart, who founded Headlight alongside Blu Wireless chairman Hemant Mardia, said the fund aimed to “give teeth” to Britain’s semiconductor strategy, providing funding to high tech chip manufacturing businesses.

It is planning an initial raise of £100m, targeting up to £500m, and is in talks with taxpayer-backed patient capital funds.

Chinese buyout

The whole issue began back in July 2021, when it was revealed that Newport Wafer Fab (NWF), the UK’s largest largest chip producer, would be acquired by Dutch chip firm Nexperia for just £63 million ($87 million).

However concerns immediately surfaced, centred over the fact that Nexperia is owned by a Chinese chip firm Wingtech Technology.

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.

National security

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

Then in May this year, the government’s promised full national security review of the purchase finally began.

In July business secretary, Kwasi Kwarteng delayed making a decision on the deal until 5 September.

Using the National Security and Investment Act, Kwasi Kwarteng has the option to either block the deal, demand remedies, or allow it to go ahead.

Nexperia argument

Nexperia however has argued its acquisition of Newport Wafer Fab would save jobs and secure the long-term future of the site.

In a letter to MPs, it was quoted by the Daily Telegraph as saying the following:

“Only Nexperia was able to step in and secure the future of the site and the 500 jobs there. It achieved this by providing access to a reliable flow of global contracts, immediately paying back the loan to the Welsh Government and committing £80m for new equipment to upgrade the site.

“The previous owners thereby escaped bankruptcy and received full market value for their shares, plus an option to continue developing an ‘open access’ facility on part of the site,” it reportedly said.

Nexperia has said it would be open to outside investment in one building at the Newport site, known as Fab 10, which would allow a third party to develop chips at the plant.