The business secretary, Kwasi Kwarteng, has launched an inquiry into the proposed takeover of the UK’s largest microchip manufacturer Newport Wafer Fab by Chinese-backed Nexperia.
Kwarteng said on Wednesday that the deal will be scrutinised under the new National Security and Investment Act, which was introduced at the start of the year.
Any deal for Newport Wafer Fab, which is located in south Wales, is particularly sensitive as the company has multiple contracts with the UK government, including defence-related projects.
Nexperia, which is looking to acquire Newport Wafer Fab in a £63m deal, is based in the Netherlands but is a subsidiary of China’s partially state-backed Wingtech.
Kwarteng tweeted: “We welcome overseas investment, but it must not threaten Britain’s national security.”
Today, I called-in the acquisition of Newport Wafer Fab by Nexperia, a subsidiary of a Chinese company.
There will now be a full assessment under the new National Security and Investment Act.
We welcome overseas investment, but it must not threaten Britain’s national security. — Kwasi Kwarteng (@KwasiKwarteng) May 25, 2022
The business secretary now has 30 working days to make a decision, with the option to extend the time for a further 45 working days. He can then block the deal, demand remedies or allow it to go ahead.
A Nexperia spokesperson said: “We have been informed of the Secretary of State’s decision. We welcome this opportunity to engage and contribute to an informed debate about our UK activities and investment plans.”
MPs including Tom Tugendhat, the chair of the foreign affairs committee, have already voiced their concerns over the deal, saying they believe the purchase would give China access to cutting-edge British semiconductor designs.
Separately, parliament’s business, energy and industrial strategy (BEIS) committee launched an inquiry into the strengths and weaknesses of the UK semiconductor industry and its supply chain, after months of global shortages and disruption that have hit production of cars, electronics and home appliances.
Semiconductors, also known as computer chips, are the “brain” within every electronic device, and have been in short supply since the start of the pandemic, when Asian factories shut down as Covid-19 spread.
Even though production was not halted for long, the semiconductor industry has not been able to manufacture enough to keep pace with rocketing demand for products that require higher numbers of chips such as electric vehicles, 5G-enabled mobile phones and games consoles, including the PlayStation 5.
The British automotive industry’s output was knocked in 2021 by semiconductor shortages, which contributed towards a slump in car manufacturing to the lowest levels since 1956. Chips are used in cars in everything from entertainment systems to controlling windscreen wipers and electric car batteries.
Most of the world’s semiconductors are produced in factories in Taiwan and South Korea, although China has been trying to increase its dominance in the sector.
The use of chips for military purposes means access to them is considered a national security matter.
Darren Jones, who chairs the BEIS committee, said: “We’ll be considering the government’s assessment of the acquisition of Newport Wafer Fab and how this fits into the wider semiconductor supply chain in the UK.”
Semiconductor manufacturers in countries including the US and Japan, and the EU, have been investing heavily and expanding their facilities.