Newport Wafer Fab decision raises serious questions

2 mins read

The decision by the UK Government to require Nexperia, the Dutch-based technology company and critically the subsidiary of Shanghai listed Wingtech, to sell its stake in the Newport Wafer Fab brings to end an extended period of uncertainty but in the process raises a number of questions.

While Nexperia is now required to sell 86% of its stake "to mitigate the risk to national security" following a review, it is expected to appeal against a decision it described as a ‘shock’.

The Wafer Fab deal, it was acquired by Nexperia back in July 2021, came under scrutiny amid an ongoing global shortage of computer chips and concerns that the takeover represented the sale of "one of the UK's prized assets" to a strategic competitor and that it potentially compromised national security.

In its decision, the UK Government said the takeover of Newport Wafer Fab created two risks to national security: the first related to Nexperia's development of the Newport site, which the government said could "undermine UK capabilities" in producing compound semiconductors; while the second concerned the plant's location as part of a semiconductor cluster on the Duffryn industrial estate, which it said could "facilitate access to technological expertise and know-how".

Nexperia said it did not accept the national security concerns around its Chinese parent company and its links to the Chinese state and criticised the UK Government for not entering into "meaningful dialogue".

According to Nexperia it rescued an investment-starved business, it’s repaid taxpayer loans and, in the process, secured hundreds of well-paid and skilled jobs – all of which are now at risk. A proposed £80m upgrade to the facility is now unlikely to happen.

Two issues emerge from this protracted review. The first, as Dr. Simon Thomas, CEO and Founder of Paragraf said was that while the industry understood that national security was undoubtedly important, and every care must be taken to ensure that the UK and its interests are protected:

“Significant steps must be taken to minimise the delays involved in these investigations in the future.  British companies cannot afford to lose competitive advantage, which is the unintended result of these drawn-out investigations and absence of direction that causes customers and shareholders to become frustrated and potentially look for clarity elsewhere. 

“The Government should consider concrete and efficient processes to review national security concerns in a manner that provides a timely outcome for all in a clearly outlined and transparent process.”

But it also raises the question – what is the future of the UK’s semiconductor industry?

It’s all well and good blocking this deal but what will replace it? Nexperia had committed considerable funds to improving and developing the facility at a company that had been starved of investment.

At a time when the US, Europe, China, Taiwan and Japan are all committing vast sums to support and develop their domestic semiconductor industries the UK is beset by confusion, a lack of clarity and vision and, most importantly, the resources.