The global shortage of semiconductors has seen Chinese-backed company Nexperia seal a deal for a 100% stake in Newport Wafer Fab in the UK. (Photo by Shutterstock)

The foreign acquisition of the UK’s largest semiconductor plant has prompted concerns around Chinese ownership of the country’s chip manufacturing capacity amid a global shortage.

The deal, which gives Chinese-owned, Netherlands-headquartered company Nexperia a 100% stake in Newport Wafer Fab (NWF) in Wales, highlights the deep geopolitical tensions playing out within the global semiconductor industry – whose crucial technology is used to make cars, planes, computers, missiles and more.

“I don’t understand why the government doesn’t seem to be looking into this, especially in the midst of a global chip shortage,” says Emily Taylor, an associate fellow with Chatham House’s international security programme. “It just seems inconsistent with the new National Security and Investment Act, as well as the protective approach that the UK took with regards to Huawei and 5G last year.” 

China swoops, but the UK turns a blind eye on Nexperia

To clarify what is at stake, Nexperia’s acquisition will see the UK’s largest chip manufacturing plant fall into Chinese hands during an unprecedented global chip shortage that is expected to last until 2023. Moreover, since the outbreak of Covid-19, the UK has followed the global trend of tightening control over inbound foreign investment in order to protect strategic assets, such as semiconductors, from Chinese investors

This culminated in April with the historic National Security and Investment Act, Europe’s most stringent legislation of this kind, created for the express purpose of reviewing investments such as Nexperia’s, some would argue. The UK government’s silence on the issue is even more salient in light of the fact that Nexperia is partially backed by the Chinese state, as well as the fact the UK recently signed the Carbis Bay G7 communique in which it pledged to take steps to protect critical global supply chains, such as semiconductors. 

A UK government spokesperson has said that the state does not consider it appropriate to intervene at this time, according to CNBC. 

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Blocking Chinese investment is not new to the Johnson government, which has already intervened in the cases of Inmarsat and Cobham – even before the April investment act – as well as the controversial ban on Huawei developing the UK’s 5G network.  

A welcome for Nexperia in the valleys

Upon the announcement of the completed deal on 5 July, Paul James, managing director at NWF’s Wales site, said: “The acquisition is great news for the staff in Newport and the wider business community in the region as Nexperia is providing much-needed investment and stability for the future.”

Indeed, the acquisition is set to secure 400 jobs at the site as well as significant investment in the facility, such as new equipment to grow the business. It will also help NWF pay off a debt of £18m ($24.83m) to the Welsh government, according to CNBC

Nexperia became NWF’s second-largest shareholder in 2019. In addition to the Newport site, Nexperia’s other European manufacturing operations in Manchester and Hamburg have also seen significant recent investments by the Chinese company.

According to the Brookings Institute, China imports more than $300bn of semiconductors every year, prompting the Chinese government to push investment in manufacturing capacity both onshore and abroad.

As attention grows on the peculiar case, the UK government is expected to clarify its lack of action in the coming weeks.