China-backed Nexperia acquires UK's biggest microchip factory

Market watchers are concerned about the deal on security grounds

Nexperia, a Dutch firm owned by China's Wingtech Technology, has completed the acquisition of Newport Wafer Fab (NWF), a semiconductor production facility in Wales.

Financial details were not available, but sources claim that the deal was worth around £63 million (about $87 million).

While both companies said they were 'excited' about the deal, the announcement met with concern across the UK. Market watchers were uneasy at the government's approval of the sale of a key asset to a Chinese-owned firm amid a global chip shortage, which could last for years.

NWF is capable of creating power and compound semiconductor ICs on 200mm-diameter wafers, producing around 35,000 wafers a month.

Tom Tugendhat, Conservative MP for Tonbridge and Malling and chair of the Foreign Affairs Select Committee, said he was "surprised" to see that the government had not yet ordered a review of the NWF acquisition under the National Security and Investment Act (NSIA).

The NSIA, introduced in April, gives the government the power to block foreign takeovers on national security grounds.

"The semiconductor industry sector falls under the scope of the legislation, the very purpose of which is to protect the nation's technology companies from foreign takeovers when there is a material risk to economic and national security," Tugendhat said.

"Having been in touch with partners in the US and around the world, I know I am not alone."

Earlier in June, Tugendhat had written to UK business secretary Kwasi Kwarteng to ask him to review any proposed deal for NWF under the new legislation.

"I must stress again that having the UK's leading 200mm silicon and semiconductor technology development and processing facility being taken over by a Chinese entity - in my view - represents a significant economic and national security concern," Tugendhat said at that time.

Kwarteng, however, declined to investigate, instead saying the government was monitoring the situation closely.

The Nexperia-NWF deal has come at the time when China is trying to attain self-sufficiency in chip manufacturing. The country has faced US sanctions for the past two years, which prohibit Chinese firms from buying chips made with American technology.

Nexperia, owned by Chinese private equity firm Wingtech Technology, is already the second-largest shareholder in NWF.

Wingtech acquired Nexperia in 2018 as part of a global expansion into microchips. The Chinese company assembles smartphones for firms such as Huawei.

Nexperia expects NWF deal to help it to make more chips and keep pace with semiconductor demand globally.

NWF operations director Paul James said that the deal would help secure vital investment for the company.

Drew Nelson, departing chairman at NWF, said: "The change in ownership of the Newport site marks an important step for the future of the facility as well as for the region. We are pleased that we are able to maintain the expertise in developing high end silicon devices in the 200 mm wafer fab while at the same time opening up opportunities for us to add new semiconductor technologies".

Sources told CNBC that a large part of the £63 million will go toward servicing NWF's debts. NWF owes HSBC Holdings about £20 million, and the Welsh government another £18 million. Those debts would be paid off once the deal is completed.