The Newport Wafer Fab mainly produce high-power chips with mature technology. Photo: Google Maps

A Netherlands-based Chinese firm was ordered by the United Kingdom government to sell its majority stake in the country’s largest semiconductor foundry for national security reasons.

Nexperia B V, a wholly-owned subsidiary of the Shanghai-listed Wingtech Technology, said it was informed by the UK Department for Business, Energy and Industrial Strategy that it had to dispose of at least an 86% stake in the Newport Wafer Fab in Welsh.

Wingtech said Nexperia only contributed less than 1% of its revenue so the incident would not have a significant impact on its business results.

The UK’s decision, together with the scrapping of two chip-fab deals in Germany, came after the United States reportedly called on the European Union to impose a semiconductor export ban on China last month.

Mao Ning, a spokesperson for the Chinese foreign ministry, said Friday that the British government had generalized the concept of national security and abused state power to directly interfere with the normal investment and cooperation of Chinese companies in the UK.

Mao said China firmly opposes a UK decision that violated the market economy principles and international trade rules that the UK had always advertised.

She said the UK should respect the legitimate rights and interests of Chinese companies and provide a fair, just and non-discriminatory business environment for companies from all over the world.

The UK’s decision was announced on Wednesday, when there was scheduled to be a meeting between British Prime Minister Rishi Sunak and Chinese President Xi Jinping on the sidelines of the G20 summit in Bali, Indonesia. That dialogue was canceled at the last minute as Sunak was occupied by a meeting related to a missile that had hit a village in Poland, a NATO member.

The US Commerce Department’s Bureau of Industry and Security (BIS) on October 7 unveiled new curbs against China’s semiconductor industry. It banned the exports of high-end chips and chip-making equipment to Chinese companies and forbade US citizens to serve at certain chip fabs in China without licenses.

Alan Estevez, US Commerce Department undersecretary for industry and security, said on October 27 that the US would soon sign an agreement with its allies to bring them on board with new rules curbing China’s access to sophisticated chipmaking tools.

However, major chip-making equipment suppliers, including ASML in the Netherlands and Nikon and Canon in Japan, have not yet announced any plans to cut shipments to China.

On November 9, Germany’s Ministry of Economics and Climate Action said it had prohibited Elmos Semiconductor, an auto chip maker, from selling its factory in Dortmund to Silex Microsystems AB, a Sweden-based unit of China’s Sai Micro Electronics. Media reports said Berlin also blocked a deal that would allow a Chinese company to take over ERS Electronic in the southern state of Bavaria.

On Wednesday, UK Business Minister Grant Shapps ordered Nexperia to sell its majority stake in Newport Wafer Fab, which produces about 32,000 silicon wafers per month.

“We welcome foreign trade and investment that supports growth and jobs,” Shapps tweeted. “But where we identify a risk to national security we will act decisively.” 

“We are genuinely shocked,” said Toni Versluijs, UK country manager at Nexperia. “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 ‘leveling up’ but leveling down communities like South Wales.”

Versluijs said the decision would undermine the UK’s semiconductor industry as Nexperia brought new production to Newport. He said UK taxpayers could now face a bill of over £100 million (US$119.2 million) for the fallout from this decision. 

Nexperia had originally owned a 14% stake in Newport Wafer Fab before it bought the remaining 86% share in July 2021. 

Citing a notice previously issued by the UK Companies House, Wingtech said in a statement on Thursday evening that Nexperia had already completed the acquisition of Newport Wafer Fab on August 12 last year.

The partially state-owned company said the Department For Business, Energy and Industrial Strategy started investigating the Newport deal in May 2022. It said it received an official notice from the department on Thursday that it had to sell the controlling stake in Newport.

It said the impact of the UK’s decision on Wingtech was small as Newport only produced high power chips with mature technology. It said it would expand its productions in its existing fabs in Manchester and Hamburg.

As of September 30, 2022, Newport’s total assets amounted to 475 million yuan (US$66.8 million) while its net assets were 211 million yuan. In the first three quarters of this year, Newport generated a revenue of 318 million yuan, which accounted for 0.76% of Wingtech’s total revenue. However, it recorded a net loss of 35 million yuan for the period.

Read: Germany blocks chip deal with China after Scholz visit

Follow Jeff Pao on Twitter at @jeffpao3