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November 17, 2022

Nexperia takeover of Newport Wafer Fab blocked on national security grounds

The Chinese-owned company must sell Britain's largest chip plant, the business secretary says. Staff at the factory could face an uncertain future.

By Matthew Gooding

The takeover of Newport Wafer Fab, Britain’s largest semiconductor factory, by the Chinese-owned Nexperia Group is set to be reversed after business secretary Grant Shapps said the deal poses a security risk to the UK.

Newport Wafer Fab is set for new ownership once more as Nexperia has been ordered to sell the plant. (Photo by Matthew Horwood/Getty Images)

Following a long-running investigation into last year’s acquisition of the site by Nexperia, Shapps has used powers granted to him under the National Security and Investment Act to order Nexperia to sell a majority stake in the factory. MPs had previously raised concerns that allowing a Chinese company to control what could be a strategic national asset was problematic.

Though Nexperia is based in Holland, it is a subsidiary of Chinese company Wingtech Group. The company said it was “shocked” by the decision and plans to appeal. The UK’s biggest chip plant, Newport Wafer Fab was founded in 1982 and makes power electronics chips, predominantly for clients in the automotive sector.

Why is the government blocking Nexperia’s Newport Wafer Fab takeover?

A notice published by the government says Shapps decided to intervene for two reasons.

Firstly, because it says “technology and know-how that could result from a potential reintroduction of compound semiconductor activities at the Newport site, and the potential for those activities to undermine UK capabilities”. Newport Wafer Fab has previously carried out development work on compound semiconductors, which combine silicon with other materials such as gallium nitride, or GaN, to achieve improved performance in areas such as power electronics.

Toni Versluijs, UK manager at Nexperia, had previously told MPs that his company was prepared to support the development of a spin-out company to revive this work, and would provide a building at the Newport site to house the new business.

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The decision notice also raises concern that “the location of the site could facilitate access to technological expertise and know-how in the South Wales Cluster, and the links between the site and the Cluster may prevent the Cluster being engaged in future projects relevant to national security”.

South Wales is home to a number of businesses and academics working on chip technology.

Following Shapps’ decision, Nexperia must sell at least 86% of the Newport Wafer Fab it purchased last year. The timescale for a sale has yet to be revealed.

What is the future for Newport Wafer Fab?

The blocking of the deal is likely to be welcomed by MPs concerned about growing Chinese influence in UK tech businesses. Security minister Tom Tugendhat, who previously said the government was “turning a blind eye” to the consequences of the sale, said on Twitter he backed Wednesday’s decision.

The news is unlikely to go down so well with the 500 employees at Newport Wafer Fab, which has had a chequered ownership history in recent years and was reportedly on the verge of bankruptcy before Nexperia’s buyout. In September, staff at the plant wrote a joint letter to The Times urging the government not to intervene in the sale and saying they “fully supported” Nexperia’s ownership of the factory.

Versluijs said the company was “genuinely shocked” by the news. “The decision is wrong, and we will appeal to overturn this divestment order to protect the over 500 jobs at Newport,” he said.

He added that the business, which already employs 1,000 people at a factory in Manchester, believes there has been a lack of willingness from the government to engage with it to address security concerns. “We are hugely disappointed by this extraordinary U-turn, and the greater uncertainty that it creates for our employees and their families in Wales,” he said.

Read more: Can the US hurt China with semiconductor sanctions?

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