UK ministers quietly approve takeover of Chinese microchip factory – POLITICO

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LONDON – The UK government has quietly approved the controversial sale of a Welsh microchip factory to a Chinese-owned company.

Ministers have decided not to intervene in the takeover of Newport Wafer Fab, which makes semiconductors, after a review by the government’s national security adviser Stephen Lovegrove.

More than six months after being asked to look into the sale, Lovegrove concluded there weren’t enough security concerns to block it, according to two government officials.

The decision has already sparked alarm from security experts and backlash from Tory MPs who believe the government is applying too narrow a definition of national security.

Tom Tugendhat, the chairman of the House of Commons’ Foreign Affairs Committee, said: “It is not clear why we have not used our new powers under the National Security and Investment Act to fully consider the acquisition of one of our leading compound semiconductor companies. ”

He added: “This is an area where China is sinking billions to compete. The government does not have a clear strategy to protect what is left of our semiconductor industry.”

Iain Duncan Smith, a former Conservative leader and longtime critic of the Chinese government, said the decision was “ridiculous”. “Kwasi Kwarteng must champion access to key technologies in the West that China is determined to take control of,” he said, referring to the UK’s business secretary.

Duncan Smith warned: “If the government takes this route, it will be another step in the pathetic process of appeasement of China, which currently supports Russia and plans to directly and deliberately threaten Western access to microchips and other key components for electronic devices .”

No 10 Downing Street said it had not commented on national security assessments. An official with the Department for Business, Energy and Industrial Strategy said: “We reserve the right to intervene under the National Security and Investment Act where there are national security concerns.”

Endangerment of “long-term viability”

The decision is likely to spark fresh concerns about the role of China-linked companies in key UK industries.

Newport Wafer Fab is the UK’s largest semiconductor factory. Semiconductors, also called microchips or chips, are an essential part of electronic devices.

Nexperia, a Dutch subsidiary of Chinese tech company Wingtech, planned to acquire Newport Wafer Fab last spring, despite calls from Kwarteng at the time to step in.

A former security official, who declined to be named because of the sensitivity of the decision, said, “What Newport Wafer Fab is doing right now is not that extraordinary — you can argue that it’s not strategically important, and that’s a plausible case.”

“But it’s part of an existing industrial base that can develop at a lower cost, and if you sell it to the Chinese, then it’s gone from your strategic sphere of control and long-term capability,” they added.

In July, Boris Johnson unexpectedly announced that he had asked Lovegrove to revisit the sale.

Over the summer, said Ciaran Martin, the UK’s former cybersecurity chief There were “very real concerns” about the buyout and that it posed a greater threat than allowing Chinese telecoms company Huawei to build Britain’s 5G network, another issue that has sparked heated controversy in the UK

Tony Abbott, former Australian Prime Minister and adviser to the UK Department of Trade, said at the time that the sale “wouldn’t happen if it happened in Australia”.

Lovegrove’s review has been extended to 2022 to allow ministers to intervene if necessary with new powers introduced by Britain’s fledgling National Security and Investment Act. They have concluded that there is no need for action but insist the case will remain under surveillance.

According to one of the acting government officials cited above, Lovegrove came to the same conclusion as the assistant national security adviser who initially looked into the takeover. The official said Newport Wafer Fab uses 20-year-old technology that the Chinese already have.

Ten deals involving different countries are currently under scrutiny under the law, which was introduced to strengthen the government’s powers to block hostile foreign investment. Separately, Kwarteng has instructed the competition watchdog to conduct a national security review of a Chinese-linked buyer’s acquisition of Perpetuus, a graphene maker.

Catherine West, Labor deputy leader of the all-party parliamentary group on China, said it was “deeply concerning that the UK government appears to be giving the green light to a Chinese-owned firm buying a British company of such importance”. she would write to the ministers.

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