UK ‘refuses to intervene’ in microchip factory deal after China security probe

Wales-based company Newport Wafer Fab was taken over last year by a Dutch company owned by Chinese smartphone company

A chip production line in China. Reuters

The UK government will not intervene in the takeover of Britain’s biggest semiconductor plant by a Chinese-owned company despite the security concerns of ruling party MPs, according to reports on Friday.

British Prime Minister Boris Johnson ordered a review in July last year of the reported $87 million acquisition of Wales-based Newport Wafer Fab by Netherlands-based company Nexperia.

Nexperia is owned by Chinese smartphone company Wingtech.

The review by national security adviser Stephen Lovegrove concluded that there were not enough concerns to block the deal, according to the Politico website.

Nexperia said on Friday it had not been notified of any decision. It said it had not heard from the government since it bought Newport Wafer Fab and "previously informed the government to be ready to co-operate with any review".

MPs had expressed alarm at the deal because it moved strategically vital companies and assets abroad. In a report, Sovereignty for Sale, the Foreign Affairs select committee said that the takeover “represents the sale of one of the UK’s prized assets to a strategic competitor”.

The sale came at a time when global chips, which are vital for manufacturing, are in short supply because of a Covid-19-fuelled surge in demand for home electronic devices.

“This is an error,” said the chairman of the committee, Tom Tugendhat, in a tweet on Friday.

Some of the greatest security concerns involving the takeover of UK companies are linked to China. In 2020, the UK banned Chinese telecoms company Huawei from involvement in the installation of Britain’s 5G broadband network because of US concerns about spying.

Branding Huawei a security threat, the US barred the company from the American market, cut it off from global supply chains and mounted pressure on allies to ban or remove its equipment from their national telecoms systems.

China criticised the move and issued a warning that the decision could affect investment in the UK and was a “betrayal” of the principles of free trade.

The UK introduced a new law last year that allowed the government to screen certain deals because of national security concerns.

Mr Tugendhat told Politico: “It is not clear why we haven’t used our new powers under the National Security and Investment Act to fully review the takeover of one of our leading compound semiconductor companies.

“This is an area where China is sinking billions to compete. The government has no clear strategy to protect what is left of our semiconductor industry.”

The UK government said it was continuing to monitor the situation and would take further action if necessary.

“The Government is considering the case and no decisions have been made,” a government spokesperson said.