UK and China’s Acquisition of Domestic Semiconductor Manufacturing Facilities Ultimately Blocked... National Security Concerns

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The UK government has ultimately blocked the acquisition of a domestic semiconductor factory by Chinese capital. It appears that China's semiconductor ambitions, which aimed to establish a foothold by purchasing semiconductor manufacturing facilities worldwide and expanding its reach, are being increasingly thwarted.

According to Bloomberg and other sources on the 16th (local time), the UK Department for Business, Energy and Industrial Strategy announced that it would not approve the acquisition of the Newport wafer fab near Wales in the UK by the Dutch semiconductor company Nexperia, ordering the company to divest most of its shares.

Nexperia had purchased all shares of Newport wafer fab, in which it previously held a 14% stake, in July last year. At that time, the acquisition price was reported by foreign media to be ?63 million (approximately 100.3 billion KRW). With this disapproval decision, the UK government ordered Nexperia to sell 86% of its shares within a certain period.

The reason the UK government blocked Nexperia's fab acquisition is that the company holding the majority of Nexperia's shares is the Chinese company Wingtech Technology. It was pointed out that this is effectively equivalent to a Chinese company securing semiconductor production facilities in the UK.

In January, the UK government enacted the National Security and Investment Act (NSI), which prohibits the export of technology related to national security to protect domestic technology. Based on this, the UK government has been reviewing for over a year whether Nexperia's fab acquisition contract poses any national security issues.

Grant Shapps, the Secretary of State, mentioned advanced semiconductors used in electric vehicles and stated that the potential resumption of complex semiconductor activities poses risks to national security and could affect the UK. He added, "We welcome foreign trade and investment that supports growth and jobs. However, we will act decisively on areas that pose national security risks."

Nexperia announced that it plans to appeal the UK government's disapproval decision immediately. Nexperia said, "We are truly shocked. This decision is wrong," and added, "We will appeal to overturn this divestment order to protect over 500 jobs in Newport."

Earlier, on the 9th, the German government also banned the sale of its domestic semiconductor manufacturer Elmos's production facilities and semiconductor manufacturing equipment company ERS Electronic to China. Robert Habeck, Germany's Vice Chancellor and Federal Minister for Economic Affairs and Climate Action, said, "The cabinet has made negative decisions regarding two investment proposals. We must carefully examine acquisitions of companies related to critical infrastructure or those that pose a risk of technology leakage outside the European Union (EU)."

These moves are similar to the US government's blocking of the acquisition of MagnaChip Semiconductor by Chinese capital last year. MagnaChip signed a sales contract with the Chinese private equity firm Wise Road Capital in March last year, but the US Committee on Foreign Investment in the United States (CFIUS) blocked it in December of the same year citing national security concerns, ultimately causing the contract to fall through.