The UK government required the semiconductor firm Nexperia BV to sell most of its acquired Welsh wafer fab due to “risk to national security” on Wednesday. Nexperia BV is a Dutch subsidiary of China’s Wingtech technology. 

The Welsh wafer fab, named Nexperia Newport Limited (formerly Newport Wafer Fab), is the largest fab in the UK, according to CNBC’s reporting. It has been fully acquired by Wingtech since last year.

Why it matters: This is a stronger move to stop China from acquiring critical semiconductor tech from the UK. Previously, the UK government just declined such acquisitions as it did in the case of a Chinese company trying to acquire electronic design automation (EDA) firm Pulsic.

  • UK officials could now push harder to ask Chinese firms to lose control of formerly UK-owned entities related to semiconductor tech. 

Details: The acquisition began in 2018, when Wingtech obtained 79.97% of Nexperia’s shares, becoming its largest shareholder. Wingtech then bought the rest of Nexperia’s shares in 2020. During the previous year, Nexperia also invested in Nexperia Newport Limited (then Newport Wafer Fab) and became the company’s second-largest shareholder.

  • In July 2021, Wingtech obtained full control of Nexperia Newport Limited when Nexperia acquired the remaining 86% of Nexperia Newport Limited’s shares, according to the UK’s notice. The deal closed in August 2021, according to Chinese media outlet Caixin.
  • According to the “notice of Final Order” from the UK Department for Business, Energy and Industrial Strategy (BEIS), the acquisition met the criteria of a risk to national security. Specifically, the stated risk related 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.”
  • The notice also suggested that Nexperia Newport Limited could serve as a block of a local industry alliance called the South Wales Cluster, for national security purposes.
  • The notice requires Nexperia BV to sell at least 86% of Nexperia Newport Limited during a specified period and through a specified process, which is almost equal to an undoing of the acquisition.
  • Nexperia made an announcement on the same day, saying the firm is “shocked by the Secretary of State’s order to divest Newport Wafer Fab.” The announcement stated that the acquisition was cleared by two previous security reviews and the company expressed disappointment in the UK government’s inconsiderable actions without proper negotiation with the firm.
  • In addition to the complaint, the firm claimed that it would “prioritize looking after the impacted employees at Nexperia Newport and reducing the negative impact on its customers.”

Context: Wingtech is a Shanghai-listed firm focusing on integrated device manufacturing, imaging module, and communication product integration, according to its official website.

Ward Zhou is a tech reporter based in Shanghai. He covers stories about industry of digital content, hardware, and anything geek. Reach him via ward.zhou[a]technode.com or Twitter @zhounanyu.