Welsh government was blocked from investing more money in Newport Wafer Fab

The Welsh government gave NWF a £13 million loan in 2017 when the firm was acquired in a management buyout from Germany's Infineon

The Welsh government says it was blocked from investing more money in UK's largest microchip factory Newport Wafer Fab (NWF) after China-backed Nexperia got pre-emptive rights in 2019 to buy the facility.

"We have been in discussions with the previous directors of Newport Wafer Fab about its plans for over a year, and took legal and financial advice on options to support the business," a spokesman for the Welsh government told the BBC.

"However, an agreement between the then majority shareholders of NWF and the then minority shareholder, Nexperia, gave legal rights to Nexperia which made it impractical for new investors, including the Welsh Government, to put further investment into the business."

The Welsh government gave NWF a £13 million loan in 2017 when the company was acquired in a management buyout from Germany's Infineon.

That loan "has been recouped, with interest," according to the Welsh government.

Nexperia, a Dutch company owned by China's Wingtech Technology, said last week that it was acquiring NWF in a deal that would help it to make more chips and keep pace with semiconductor demand globally.

While financial details of the agreement were not available, some reports claimed that it was worth around £63 million. And while both companies said they were "excited" about the deal, the announcement was 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.

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 ordered a review of the NWF acquisition under the National Security and Investment Act (NSIA).

Responding to Tugendhat's concerns, Kwasi Kwarteng, the Business Secretary, said the deal was carefully considered from a national security perspective and that it was not believed to raise any issues.

However, Prime Minister Boris Johnson announced on Wednesday that he had referred the matter to Sir Stephen Lovegrove, the national security adviser.

"We are looking into it," the prime minister told Westminster's Liaison Committee, adding that the government needs to judge whether the items being manufactured at NWF are "of real intellectual property value and interest to China" and whether there are any security implications for the UK.

Mr Johnson also said that the Welsh ministers had urged the UK government to review NWF's acquisition, although the Welsh government has denied that claim.

"The Welsh government has not made a request to the UK government to review the takeover of Newport Wafer Fab," the spokesperson said.

NWF, which employs 450 people, makes wafers of semiconductors at its plant in Newport and Duffryn. It is capable of creating power and compound semiconductor ICs on 200mm-diameter wafers, producing around 35,000 wafers a month.

After Nexperia made the announcement about the NWF acquisition last week, the firm's outgoing chairman Dr Drew Nelson said that the deal would help secure the company's future and production of semiconductors in Wales.