China's Semiconductor Factory Acquisition Stalled Over a Year Without Approval... What Did the UK Contemplate?

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The UK government has been withholding approval for over a year on the acquisition of a domestic semiconductor factory by Chinese capital. While continuously extending the deadline to review whether it poses a threat to national security, it is reported to have settled on restricting or denying the acquisition. This situation appears similar to the US government's blocking of the acquisition of MagnaChip Semiconductor by Chinese capital last year.

According to Bloomberg on the 4th (local time), Kwasi Kwarteng, the UK Secretary of State for Business, Energy and Industrial Strategy, extended the final review deadline once more on the 2nd for the approval decision regarding the Dutch semiconductor company Nexperia's acquisition of the Newport Wafer Fab near Wales, UK. Originally, this deadline was set to expire on the 5th, but the UK government stated that the deadline was postponed to "review whether to make a final decision under the National Security and Investment Act (NSI)."

Nexperia announced the acquisition of Newport Fab in July last year. The Newport Wafer Fab itself is not considered a site with highly advanced semiconductor technology. It is a factory manufacturing parts for electric vehicles and smartphones and is one of the four major companies in the Wales semiconductor cluster. Nexperia partially acquired shares of this fab in 2019 and stepped forward to acquire the fab, which was effectively on the brink of bankruptcy amid the COVID-19 pandemic.

The reason the UK government has not granted approval for over a year is that the company holding the majority stake in Nexperia is China's Wingtech Technology. It has been pointed out that this is effectively equivalent to a Chinese company securing semiconductor production facilities in the UK. In January, the UK government enacted the National Security and Investment Act, which prohibits the export of technology related to national security to protect domestic technology. The UK government, which announced in April that it would review Nexperia's acquisition of Newport Fab that occurred before the enactment, had already extended the review deadline once in July.

Bloomberg, citing sources, reported, "The final decision is expected within weeks," and that the mood is leaning toward restricting or blocking the acquisition. With Liz Truss, the Foreign Secretary and a leading candidate for the next UK Prime Minister, declaring a reduction in the UK's dependence on China, it is expected that the new Secretary of State for Business, Energy and Industrial Strategy appointed by the new cabinet will make this decision.

Previously, some speculated that the UK government faced a dilemma, as restarting this factory, which had experienced financial difficulties, might help revive the UK semiconductor industry. Nexperia stated that if the acquisition proceeds, the factory would continue operating in the UK and create jobs, and that blocking it would not benefit the growth of the UK semiconductor industry.

Jeffrey Owen, who is in charge of industrial policy at the UK think tank Policy Exchange and recently released a report on the UK semiconductor industry, told foreign media, "Much will depend on how the country's (UK's) politics develop over the next 6 to 12 months," suggesting the possibility that the UK government may adopt a more closed stance regarding acquisitions of companies by foreign capital.

The UK government's hesitation over the acquisition of Newport Fab by Chinese capital is interpreted in a similar context to the US blocking the sale of semiconductor company MagnaChip to Chinese capital last year, citing national security concerns amid China's semiconductor ambitions. Considering the possibility that the UK government may not grant approval to Nexperia, a consortium led by Ron Black, who previously led a UK semiconductor design company, recently expressed through foreign media its intention to acquire Newport Fab.

This content was produced with the assistance of AI translation services.