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UK to block sale of Newport Wafer Fab

“The decision is wrong, and we will appeal to overturn this divestment order."

The UK government has blocked Nexperia from owning Newport Wafer Fab on national security grounds, because of Nexperia’s Chinese ownership, and ordered it to sell 86% of its stake in the company.

According to the government’s Final Order, business secretary Grant Shapps believes there is a national security risk relating to “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”.

There is also a risk “the location of the site could facilitate access to technological expertise and know-how in the South Wales Cluster [of technology firms]… and the links between the site and the Cluster may prevent the Cluster being engaged in future projects relevant to national security”.

In other words, sensitive semiconductor and technology projects may be kept away from the South Wales Cluster and Newport Wafer Fab, in case information from the projects would be acquired by a Chinese-owned company. And so the government has blocked Nexperia from owning the facility.

Nexperia’s UK country manager, Toni Versluijs, said in a statement the company was “genuinely shocked” by the decision, and vowed to appeal.

“The decision is wrong, and we will appeal to overturn this divestment order to protect the over 500 jobs at Newport. This decision sends a clear signal that the UK is closed for business. The UK is not Levelling Up but Levelling Down communities like South Wales,” said Versluijs in the statement.

In a typically verbose and robust statement the Nexperia country manager said the decision was “legally wrong”, claimed the fallout could generate a £100 million bill for the government, and said it failed to recognise the “commitment of our 1,000 employees in Manchester” at Nexperia’s other UK site. He also called out the government for its “refusal to have a meaningful dialogue to discuss our proposals for a mutually positive solution”.

Nexperia bought Newport Wafer Fab – now known as Nexperia Newport Limited – in 2021 for £63 million from the previous owner, Drew Nelson, after it fell into financial trouble as a result of the Covid-19 pandemic. Prior to the purchase Nexperia had owned 14% of Newport Wafer Fab since 2019. According to a Financial Times report in September, Nelson was working on a bid to buy back Newport Wafer Fab, in conjunction with Palladian Investment Partners.

The Newport Wafer Fab saga has become a focal point for the UK’s approach to foreign investment, industrial policy and national security. The combination of a global chip shortage, Britain’s woeful semiconductor industry, and growing concerns about the involvement of Chinese entities in sensitive fields, has resulted in a protracted process which has managed to please almost no-one.

Earlier this year, in evidence to a BEIS select committee inquiry into the UK’s semiconductor industry, Wave Photonics called out the sale of Newport Wafer Fab: “Ironically, one of the few examples of a national security concern, the loss of Newport Wafer Fab, the UK’s only real option for volume integrated photonics manufacture, has been allowed to proceed unhindered.”

That inquiry saw strong condemnation of the government’s strategy – or lack of – on semiconductors. The notion the UK could develop a world-class semiconductor industry – which would require investment of tens of billions of pounds over decades – was dismissed.

If blocked Nexperia does intend to appeal the government’s decision through the courts, the saga may go on for some time yet. But on the face of it, the company seems to have only a slim chance of success.

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