High Court rejects Chinese company’s plea to block forced sale of UK chip design business

And Chinese media is NOT happy

China’s FTDI Holding must sell its stake in a UK semiconductor company, the High Court has ruled.

A Chinese state-controlled holding company that owns a hefty stake in a British fabless semiconductor design company has lost its High Court bid to overturn a government order requiring it to sell-up.

The decision follows a hearing held in mid-January.

FTDI Holding Limited, which holds an 80.2% share of Glasgow-based FTDI, acquired in December 2021, had requested a judicial review into the divestiture order brought by the government in November 2024, under section 26 of the National Security and Investment Act 2021. The NSIA empowers the government to intervene in business transactions in the interests of national security.

While FTDI Holding is registered in Britain, it is controlled by a combination of five organisations based in China, linked to state-owned investment company Jiayin Investment Ltd.

The final order gave FTDI Holding one month to produce a draft disposal plan within 30 days, after being given notice a full year earlier.

The Chancellor of the Duchy of Lancaster, Pat McFadden, cited the potential for technology transfer of semiconductor IP to China and the risk of disruption to critical national infrastructure.

FTDI Holding released a statement expressing its “disappointment” at the outcome: “FTDI Holding Limited continues to believe that its ownership of Future Technology Devices International Limited (FTDI) does not, nor has it ever, presented a risk to UK national security and that a remedy short of divestment would adequately mitigate any apparent national security concerns.

“One of the purposes of the injunction was to pause the requirement to divest FTDI Holding Limited’s shares in FTDI whilst the outcome of the judicial review proceedings remains undecided. As part of its application for the injunction, FTDI Holding Limited had proposed a package of interim measures which would have mitigated any perceived risk to national security.”

FTDI was founded in 1992 and originally developed USB-to-serial converter chips. That is now part of a modest portfolio of products – bridging solutions – that have found their way into a range of embedded applications in cars, medical equipment, robots, peripherals and even in weapons systems.

FTDI is a trusted supplier of such technology, compared to various barely known suppliers of similar tech out of China.

While denying that its ownership represented any kind of national security risk, FTDI Holding had claimed that it had proposed a number of interim measures to assuage concern, while it continues to pursue a judicial review.

Intriguingly, perhaps, the case caught the attention of the Chinese Communist Party’s flagship daily newspaper, the Global Times.

“Even though it has broken no laws, rules, regulations or sanctions, it is somehow deemed a ‘risk to national security’. An official statement claimed the Glasgow-based tech firm FTDI risked operating in a way ‘contrary to UK national security’,” the Times complained.

The Times attributed the forced sale of FTDI to the uncovering of the company’s technology in a tank destroyed by Ukrainian forces in the Russo-Ukraine War, in contravention of an embargo on technology exports to Russia. “Yet, instead of requiring FTDI to change its ways, the UK punished instead its largest shareholder, Beijing-based and China-registered Future Technology Devices International Holding Ltd.”

FTDI denied having anything to do with the alleged contravention of sanctions on Russia.

The Global Times article went on to threaten the supposed reset in relations that Britain’s new government is seeking to achieve between the UK and China:

“The new government in Downing Street should take care not to repeat the foreign policy mistakes of its predecessors,” it warned.

The NSIA has previously been used to force the divestiture of Newport Wafer Fab from Chinese-owned Dutch semiconductor company Nexperia, which passed into the ownership of US-based Vishay Intertechnology for $177 million in cash in November 2023.