Exclusive: government met with Nexperia, firm blocked from semiconductor manufacturer takeover, in 2020

Ministers met with a Chinese-owned firm, which has now been ordered to sell the vast majority of its stake in a Newport-based semiconductor company on national security grounds, transparency data shows.

The government has blocked the sale of a microchip manufacturer in Wales to Nexperia, which is based in Holland but ultimately owned by a Chinese tech company, under the National Security and Investment Act.

Nexperia was one of a number of firms which met with Nadhim Zahawi when he was a minister at the Department for Business, Energy and Industrial Strategy (BEIS) in 2020 to discuss “local growth”.

Nexperia bought out Newport Wafer Fab, one of the UK’s largest semiconductor manufacturers, in July last year, but the government has issued an official order for the firm to sell at least 86% of its 100% shareholding.

The decision has been welcomed by a group of MPs who are critical of China, who said that the move will “protect our leading tech companies and research from falling into the hands of our competitors”.

The firm has criticised the decision as “wholly incorrect,” and claimed that it could ultimately cost the taxpayer £100m. It has also announced that it will launch an appeal against the order.

Why has the Nexperia buyout been blocked?

Business Secretary Grant Shapps has blocked the sale of British microchip manufacturer Newport Wafer Fab to the Chinese-owned company on national security grounds.

The company is one of the UK’s largest manufacturers of semiconductors and there was concern over its reported £63 million purchase by Nexperia, a company ultimately linked to the Chinese government through its complex ownership structure.

In July 2021, Nexperia bought a further 86% of shares in Newport Wafer Fab, taking its total shareholding to 100%.

A Government spokesperson said: “Following a detailed national security assessment, the Business Secretary has decided to issue a Final Order requiring Nexperia to sell at least 86% of Newport Wafer Fab to prevent against potential national security risks.

“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.”

Shapps said in the Final Notice Order setting out his reasoning that he considers there is a risk to national security 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”.

He noted “the location of the site could facilitate access to technological expertise and know-how in the South Wales Cluster (‘the Cluster’), and the links between the site and the Cluster may prevent the Cluster being engaged in future projects relevant to national security”.

In July 2020, Nexperia was one of a number of firms which met with a minister at BEIS to discuss “local growth,” according to the official list of ministerial meetings.

Nadhim Zahawi, who was serving as a parliamentary under secretary at BEIS at the time, met with Nexperia alongside representatives of Astrazeneca, Cleveland Steel and 30 other organisations, including a number of local enterprise partnerships.

At the time, Nexperia had shares in Newport Wafer Fab but did not completely buy the Wales-based firm until July 2021. Since October 2018, Nexperia has been a subsidiary of Wingtech, a partially state-owned Chinese firm, which bought it from a consortium of investors including a state-owned Chinese investment company.

Nexperia will appeal against decision

The order is one of only a handful to have been issued since under the National Security and Investment Act, which was passed last year. It has been welcomed by the Chinese Research Group of Conservative MPs, which has previously warned about the influence of Chinese tech firms such as Huawei within the UK market.

They said: “Our long-term security relies on the resilience of our economy and that means ensuring we don’t allow strategic assets to fall into the hands of authoritarian powers for the sake of short-term advancement.

“I’m sure many will be relieved that we aren’t handing over critical security infrastructure to a company with well-documented links to the Chinese state.

“This decision should mark the beginning of delivering on policies that strengthen British national security and protect our leading tech companies and research from falling into the hands of our competitors.”

Nexperia’s UK boss, Toni Versluijs, claimed the decision was legally wrong and disproportionate, and warned that it could cost jobs at the Newport site and leave the taxpayer with a bill of “over £100 million”..

Versluijs claimed that the government failed to engage with the firm and ignored the solutions it put forward aimed at “nullify[ing] any potential fears about possible national security risks”.

He 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.

“We have been especially disappointed that we were denied the opportunity to discuss these with the Secretary of State himself or any of his political or Private Office team.”