Computer chip designers Arm and Imagination have already been sold to foreign owned companies – the former having also subsequently been sold on to a US owned company – and yet still the UK government seems more than content to accept promises of continuity of production being maintained here in the UK and allowing highly specialist technology companies involved in software, chip manufacturing and who are involved in artificial intelligence( AI) that most of sound mind would surely consider as being crucial to our own national security at this time to be sold to owners abroad. Most worryingly of all is when I see a British company being sold to China.
Despite calls to prevent China which had acquired Imagination Technologies in 2017 and that included a plea from the former head of MI6 says the West needs to stop China getting strategic technology by acquiring Western firms, as technology rivalry with the West rises. The former head of the UK’s MI6 has stepped into the debate regarding China acquiring strategic technology from Western firms. John Sawers was by the way the chief of the Secret Intelligence Service (MI6) from 2009 to 2014, and he said that the West needs to keep stop Chinese firms acquiring Western firms with strategic tech, as the technology rivalry between China and the West deepens.
This past week has seen another important Welsh based semiconductor company quietly acquired by a Dutch based company that is ultimately Chinese owned. My first thought – are we completely mad to allow yet another important company to be Chinese owned without even thinking about the potential consequences of allowing a country such as China, one that opposes our values of freedom and democracy and that has gone back on its word on Hong Kong to have ownership of important assets and people.
The company being taken over by Nexperia, Newport Wafer Fab (NWF), the UK’s largest producer of semiconductor silicon chips, which are vital in products from TVs and mobile phones to cars and games consoles. The buying company is Nexperia, a Dutch based company owned by China’s Wingtech.
Confirmation of the deal caused Tom Tugendhat, the Conservative MP for Tonbridge and Malling and the chair of the House of Commons Foreign Affairs Select Committee to lambast UK Government failure to intervene saying that “he would be very surprised if the deal was not being reviewed under the National Security and Investment Act, new legislation brought in to protect key national assets from foreign takeover”. Well, nothing has happened yet!
Tugendhat’s calls for the government to review the sale to a foreign owner at a time when there was a severe shortage of computer chips, Mr. Tugendhat said in an interview on Monday that he would be very surprised if the deal was not being reviewed under the National Security and Investment Act, new legislation brought in to protect key national assets from foreign takeover.
“The semiconductor industry sector” he said “falls under the scope of the legislation, the very purpose of which is to protect the nation’s technology companies from foreign takeovers when there is a material risk to economic and national security.”
However, the Secretary of State for Business, Mr. Kwasi Kwarteng, had previously said that while the government was monitoring the situation closely “it does not consider it appropriate to intervene at the current time”.
In a separate letter written to the Business Secretary last month Mr. Tugendhat said this:
Dear Secretary of State,
Following my previous letter in May and some key developments, I am writing to reaffirm my concerns that the takeover of Newport Wafer Fab (NWF) by Nexperia – a 100% owned subsidiary of the Chinese-based Wingtech Technology – will not be reviewed under the National Security and Investment Act. Since installing two board members at NWF in March, Nexperia has now begun the due diligence process for the takeover of NWF.
I must stress again that having the UK’s leading 200mm silicon and semiconductor technology development and processing facility being taken over by a Chinese entity – in my view – represents a significant economic and national security concern.
With the world experiencing a shortage in semiconductor production and companies and countries competing over the limited supply that exists, it is crucial that the UK protects its strategically valuable manufacturing resources.
I therefore urge you to reconsider your advice to NWF that the completion of the company’s takeover by Nexperia would not trigger a call-in under the National Security and Investment Act.
Could you also please clarify whether you believe this is primarily a matter for the Welsh Government when the administration in Cardiff does not have the devolved authority to consider the national security implications that a transaction of this nature to a foreign purchaser would raise? Colleagues on the Foreign Affairs Committee have raised serious concern.
They are not alone. It is clear that our allies see similar transactions as a national security question. In March this year, Beijing-based Wise Road Capital agreed a deal to acquire South Korean semiconductor manufacturing company MagnaChip.
On 4 June, MagnaChip announced that it would cooperate with investment reviews by the South Korean government and the US Commission on Foreign Investment (CFIUS).
The South Korean government has categorised the company as a “national core technology”, which means that its takeover by Wise Road Capital will be automatically subject to review.
The US Department of Treasury also requested that parties involved in the transaction file notice with CFIUS. Also, in March, the Italian government blocked Chinese company Shenzhen Investment Holdings Co from buying a controlling stake in Milan-based semiconductor company, LPE, citing it as a sector of “strategic importance”.
The two examples show that our allies are treating self-sufficiency in semiconductor supply chains as a national security imperative.
Please could you advise what the government feels is different about the takeover of NWF, and why it is not r reviewing a deal involving a British company critical to the economic security of a variety of manufacturing industries falling into the hands of an entity that was set up to serve the needs of a systemic competitor
It would be valuable if I could receive a response as soon as possible. I intend to place this letter and your response in the public domain.
Tom Tugendhat
Of course, I understand the need of a company such as Newport Wafer Fab to secure expansion-based investment funding, to sell out and in the process, for the director to recoup what they have put in and take profits. But surely there are better ways that selling out to a company ultimately owned by the Chinese.
For its part Nexperia which also has manufacturing operations in Stockport and Hamburg, was reported to have said that “the deal would help it to keep pace with global semiconductor demand. Achim Kempe, the chief operations officer of Nexperia said that the company has ambitious growth plans adding that Newport Wafer Fab supports the growing global demand for semiconductors,” said Achim Kempe, the chief operations officer at Nexperia. The Newport facility” he said “has a very skilled operational team and has a crucial role to play to ensure continuity of operations.”
The value of the deal was not disclosed but has been estimated by some at around £63m.
While raising the issue now is rather typical of the old adage ‘shutting the door after the horse has bolted’ I hope that this is not the end of the story. I wish Mr Tugendhat well in his fight and I live in hope that very soon we get the message that while the Chinese are only repeating history of the old Dutch East Indies Company by investing all over the world as a means of acquiring respect and power, that the UK government gets the message that allowing the Chinese to own crucially important high tech companies could well have disastrous consequences.
CHW (London – 7th July 2021)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
M: +44 7710 779785
Skype: chwheeldon
@AirSeaRescue