Wafer Fab: Chinese-owned company told to sell Newport factory as ownership poses 'security risk'

Chinese firm Nexperia said it "does not accept the national security concerns raised" and feels solutions it has put forward to address government concerns have been "entirely ignored."

The UK Government has told a Chinese-owned company that it must sell a factory in Newport that it acquired last year.

Nexperia bought Newport Wafer Fab - a semiconductor microchip plant - in July 2021.

A review into the transaction was then launched in May this year under the National Security and Investment Act 2021.

Now the UK's Business Secretary has issued a Final Order Notice, meaning the company must sell the site, after the review found "national security risks".

Nexperia, which is based in the Netherlands but is owned by Chinese firm Wingtech, said it was "shocked" by the order and would be "appealing this wholly incorrect decision".

A UK Government spokesperson said a "detailed national security assessment" had taken place looking into the acquisition of the factory by Nexperia earlier this year.

The Chinese-owned company bought 86% of Newport Wafer Fab in July 2021, taking its sharehold to 100%.

As a result of a review, the Business Secretary concluded that Nexperia must sell at least 86% of its shares in the factory in order to "prevent against potential national security risks".

The risks identified relate to how technology and knowledge arising from certain semiconductor activity at the site would be used - specifically the potential for this activity to undermine UK capabilities.

The assessment also raised issues around how the location of the factory could facilitate access to technological expertise in the South Wales Cluster (“the Cluster”) and prevent the Cluster being involved in future projects relevant to national security.

The Cluster is a group of companies in south Wales, bringing together academic institutions, manufacturing capabilities and prototyping facilities.

The spokesperson added: “The National Security and Investment regime enables us to continue championing business and open investment, whilst protecting national security.

“The UK has a number of strengths within the semiconductor sector, including in south Wales, and through our forthcoming semiconductor strategy we will enable this technology to continue to support the UK and global economy.”

Nexperia said it employs more than 500 people at the Newport factory.

In a statement released by Nexperia, it said it was "shocked" at the decision, largely because the acquisition had been "cleared by two previous security reviews".

It said it "does not accept the national security concerns raised" and feels solutions it put forward to address government concerns were "entirely ignored."

The company said it offered remedies like not conducting "the compound semiconductor activities of potential concern" and to give UK Government "direct control and participation in the management" of the factory.

The statement added: "Nexperia will now challenge the order and will do everything possible to keep the factory and protect its employees in south Wales."

Responding to the decision on behalf of Nexperia, UK Country Manager, Toni Versluijs,said: “We are genuinely shocked. 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.

“We will appeal this wholly incorrect decision. We are hugely disappointed by this extraordinary U-turn, and the greater uncertainty that it creates for our employees and their families in Wales whilst also not recognising the commitment of our 1,000 employees in Manchester.

"As a globally successful European-centred company, with our roots at Royal Dutch Philips and proud, 90-year track record in Britain, it is astonishing that our employees face such jeopardy and hundreds of millions of pounds of foreign direct investment are not welcome."

Mr Versluijs added: “We rescued an investment-starved company from collapse. We have repaid taxpayer loans, secured jobs, wages, bonuses and pensions, and agreed to spend more than £80m on equipment upgrades since early 2021. Those who sold the business to us agreed that it was the only viable solution, and the deal was publicly welcomed by the Welsh Government.

“Quite apart from the apparent concerns raised by various parties, which we have been keen to address openly, we have been shocked by the Government’s process and its refusal to have a meaningful dialogue to discuss our proposals for a mutually positive solution."

Nexperia said it will prioritise looking after employees at the Newport factory and reducing the negative impact on its customers.

A Welsh Government spokesperson welcomed the "clarity" from the UK Government's decision and said it will now prioritise safeguarding the jobs of workers at the factory.

They added: “We remain fully committed to ensuring the continued development of our compound semiconductor cluster in south east Wales and the role it plays on a wider UK scale.

“In light of the UK Government’s decision, UK Ministers now clearly view the compound semiconductor sector in Wales as a strategic national asset as well as being internationally recognised. We therefore call on the UK Government to invest in the sector to safeguard its future.