China fights order sell stake in UK-based microchip plant

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A Chinese-backed firm has called on a US law firm to challenge the Government’s decision to block the takeover of Britain’s biggest microchip factory, a move which was made due to concerns over national security. Nexperia has been working with Akin Gump, one of the US’ leading law firms, to bring a judicial review against the Business Department after it blocked the takeover of Newport Wafer Fab, according to a report by the Telegraph. Business Secretary Grant Shapps previously issued a final order forcing Nexperia to pull back from its £63million takeover of the Welsh factory, which was first announced back in 2021.

Under the Government’s flagship National Security and Investment Act, an investigation found that Nexperia’s takeover could “undermine UK capabilities” in advanced semiconductors. Semiconductors are a crucial technology and vital components of a broad range of electronic goods, from smartphones and washing machines to electric cars and laptops. 

Wingtech, which owns Nexperia, is partly funded by the Chinese state. This raised the alarm over the possible transfer of sensitive technology. A Government spokesperson previously said: “Following a detailed national security assessment, the Business Secretary has decided to issue a Final Order requiring Nexperia to sell at least 86 percent of Newport Wafer Fab to [mitigate] against potential national security risks.”

It came after the Commons Foreign Affairs Committee also warned that Nexperia’s takeover marked the sale of “one of the UK’s prized assets” to a strategic competitor.

The warnings came as the global chip industry suffered a shortage during the pandemic, which sparked major supply chain issues. Meanwhile, China also has dominant control over the microchip market, something the West has been scrambling to address.

The plant’s location in the semiconductor cluster on the Duffryn industrial estate also threatened to “facilitate access to technological expertise and know-how”. The Government was warned that Chinese links in Newport “may prevent the cluster being engaged in future projects relevant to national security”.

However, Nexperia has denied that there is any security risk, warning that undoing the takeover could put 600 jobs in South Wales at risk. Nexperia took over the plant, which was struggling financially back in 2021. 

The first security review by the Government allowed the deal to take place, but former Business Secretary Kwasi Kwarteng called for a review back in May. A ruling on the takeover faced repeated delays before Mr Shapps finally announced that the Government would block the deal.

However, Newport Wafer Fab’s UK arm has called the move “legally wrong – being disproportionate to the remedies given”. 

The move to block the deal also came after security chiefs from the US and the UK called for more vigilance against the threat of Chinese infiltration into Western technology firms in a joint address earlier this year. 

MI5 director general Ken McCallum FBI director Chris Wray both warned of the Chinese Communist Party’s “strategic plans” to overtake the West represent a serious risk to UK businesses and research.

Mr McCallum said: “If you are involved in cutting-edge tech [such as] AI, advanced research or product development, the chances are your know-how is of material interest to the CCP. 

“And if you have, or are trying for or [have] a presence in the Chinese market, you’ll be subject to more attention than you might think. It’s been described as ‘the biggest wealth transfer in human history.’ MI5 teams see the CCP working to extract UK advantage in multiple ways.”

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Meanwhile, Prime Minister Rishi Sunak helped to pass the National Security Investment Bill to “protect ourselves against countries like China who are trying to infiltrate our companies and steal our technology” during his tenure as Chancellor. 

This lets the Government block investment in UK companies that might affect national security. Mr Sunak also warned that Beijing poses a systemic challenge to UK values and is the “biggest state-based threat to our economic security” during the G-20 summit in Bali. 

He told reporters: “My view is that China poses a systemic challenge to our values and interests and it represents the biggest state-based threat to our economic security. I think that view, by the way, is highly aligned with our allies.”

But Dutch firm Newport Wafer Fab has argued that ministers “failed to enter meaningful dialogue” over the takeover and never reacted to attempts to offer remedies, like appointing a government executive to the company’s board, for instance. 

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