UK government acquires semiconductor factory to secure military supply
Defence Secretary says it is essential to prevent the plant from falling into the wrong hands or shutting down altogether
The UK Ministry of Defence (MoD) has acquired a semiconductor factory previously owned by US company Coherent, Inc.
The factory, located in Newton Aycliffe, Durham, is the sole domestic manufacturer of gallium arsenide semiconductors, a vital component in fighter jets and other advanced military technology.
The government's purchase, reportedly valued at £20 million ($27 million), is a strategic investment to ensure a secure and reliable supply of these essential semiconductors.
Opened in 1991 by Fujitsu, the plant initially created hundreds of jobs but faced closure in 1998 due to technological challenges. Since then, it has undergone several changes in ownership. In August, The Telegraph reported that the factory had lost a contract with Apple.
Despite the setback, the plant's services remained relevant to potential future military programmes, especially with its past customer, the Italian aerospace firm Leonardo. While Coherent reportedly had no active contracts with Leonardo, insiders speculated that the factory could still be vital for upcoming, undisclosed defence projects.
The MoD's acquisition of the factory is seen as an essential move to protect the UK's defence capabilities.
"Semiconductors are vitally important for the modern world we live in, being an essential component for the functioning of almost every electronic device we use, from phones and computers to ventilators and power stations. The importance of semiconductors to military applications means the technology can allow the military to fill the gaps to support their future needs," the MoD said.
Defence secretary John Healey stressed that it was essential to prevent the plant from falling into the wrong hands or shutting down altogether. During a visit to the site last week, he highlighted the unique capabilities of the facility.
"Semiconductors are at the forefront of the technology we rely upon today, and will be crucial in securing our military's capabilities for tomorrow," Healey said.
"This acquisition is a clear signal that our government will back British defence production. We'll protect and grow our UK Defence supply chain, supporting North East jobs, safeguarding crucial tech for our Armed Forces and boosting our national security."
The factory will now operate under the new name Octric Semiconductors UK. The acquisition will also preserve 100 skilled jobs in the region.
The global semiconductor market is expected to reach $1 trillion by 2030, according to the government. Semiconductor components are essential not just for military purposes but for a wide array of industries, including consumer electronics and key national infrastructure.
The government also identifies semiconductors as a "critical technology" necessary for both national security and economic growth. In May last year, then prime minister Rishi Sunak's administration announced a 20-year strategy to ensure the resilience of the UK's semiconductor industry.
However, the government's decision to nationalise the factory is a rare intervention to secure a critical supplier.
Previous examples include the nationalisation of Sheffield Forgemasters in 2021 to protect its steel components for the UK's nuclear-powered submarine fleet.