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18 November 2022

UK Government deems Nexperia’s acquisition of Newport Wafer Fab a “risk to national security”

Pursuant to section 26 of the National Security and Investment Act 2021, the UK Government’s Secretary of State for Business, Energy and Industrial Strategy (BEIS) has made a final order after its review of the acquisition on 5 July 2021 by Netherlands-based Nexperia BV of an additional 86% of the shares of Newport Wafer Fab (NWF, now Nexperia Newport Ltd, or NNL), taking its stake to 100%.

The order determines that the acquisition constitutes a trigger event under section 8(2)(c) of the Act. Specifically, the acquisition by Nexperia (a subsidiary of China-based Wingtech Technology Co Ltd) presents a risk to national security relating to:

  • technology and know-how that could result from a potential reintroduction of compound semiconductor activities at the Newport site, and the potential for those activities to undermine UK capabilities; and
  • the location of the site could facilitate access to technological expertise and know-how in the South Wales-based compound semiconductor cluster, and the links between the site and the Cluster may prevent the Cluster being engaged in future projects relevant to national security.

As a “necessary and proportionate” measure to mitigate the risk to national security, the UK Government order has the effect of requiring Nexperia to sell at least 86% of NNL within a specified period and by following a specified process.

Nexperia says that, on 25 May, it learned that the UK Government’s Secretary of State for Business, Energy and Industrial Strategy was exercising his statutory power to retroactively ‘call in’ its acquisition of NWF. “The Secretary of State exercised this power under the new National Security and Investment Act (which became effective in January 2022), after previous reviews by BEIS and the UK’s National Security Advisor, both of which found no substantive national security concerns that should give cause to block the acquisition,” says Nexperia.

Nexperia responds that it is shocked by the UK Government’s final order, and does not accept the national security concerns raised. To fully address the Government’s concerns, Nexperia had offered to BEIS’s Investment Security Unit that it would not conduct the compound semiconductor activities of potential concern and that it would provide the UK Government with direct control and participation in the management of Newport, but that its proposal has been “entirely ignored”.

“The UK Government chose not to enter into a meaningful dialogue with Nexperia or even visit the Newport site,” says Nexperia. “More than 500 employees in Newport also raised their own significant concerns about such a divestment – the Government has chosen not to listen to them and instead taken this decision which puts the livelihoods of them and their families, as well as more than £100m of taxpayers’ money, completely unnecessarily at risk. Nexperia will now challenge the order and will do everything possible to keep the factory and protect its employees in South Wales,” it adds.

“We will appeal to overturn this divestment order to protect the over 500 jobs at Newport,” says Nexperia UK country manager Toni Versluijs. “This decision sends a clear signal that the UK is closed for business,” he adds.

“It is legally wrong – being disproportionate given the remedies Nexperia has proposed. It is wrong for the employees of Nexperia Newport – creating further uncertainty. It is wrong for the UK semiconductor industry – taking out a strong player. It is wrong for the UK economy – undermining its semiconductor industry as we brought new production to Newport. It is wrong for the UK taxpayer – who could now be faced with a bill of over £100m for the fallout from this decision,” continues Versluijs.

“We are hugely disappointed by this extraordinary U-turn, and the greater uncertainty that it creates for our employees and their families in Wales whilst also not recognizing the commitment of our 1000 employees in Manchester. As a globally successful European-centred company, with our roots at Royal Dutch Philips and proud 90-year track record in Britain, it is astonishing that our employees face such jeopardy and hundreds of millions of pounds of foreign direct investment are not welcome,” he adds.

“We rescued an investment-starved company from collapse. We have repaid taxpayer loans, secured jobs, wages, bonuses and pensions, and agreed to spend more than £80m on equipment upgrades since early 2021. Those who sold the business to us agreed that it was the only viable solution, and the deal was publicly welcomed by the Welsh Government,” notes Versluijs. “We made every effort to engage, to explain our business and made bold proposals for our operations in Newport and its management to nullify any potential fears about possible national security risks. We have been especially disappointed that we were denied the opportunity to discuss these with the Secretary of State himself or any of his political or Private Office team.”

Nexperia says that it will prioritise looking after the impacted employees at Nexperia Newport and reducing the negative impact on its customers.

See related items:

Nexperia buys Newport Wafer Fab

Tags: Newport Wafer Fab

Visit: www.newportwaferfab.co.uk

Visit: www.nexperia.com

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