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Welsh silicon wafer factory audit highlights security concerns

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Astonishment was raised in Whitehall when Boris Johnson announced this month that he had ordered his national security adviser, Sir Stephen Lovegrove, to investigate a Chinese-owned acquisition of a Welsh silicon chip maker.

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A Lovegrove lawmaker has already conducted a thorough review of Nexperia’s acquisition of Newport Wafer Fab, a Netherlands-based Chinese-owned company that already operates a similar facility in Manchester, and awarded it a clean bill of health.

As a result, Kwasi Kwarting, the business minister, said in May that he had no plans to intervene.

The prime minister’s turn reflects concern within Downing Street over China, the UK’s role in the global semiconductor industry and broader issues of domestic resilience.

The lengthy-term strategic importance of chip technology, already on the UK government’s agenda as ministers investigates the proposed sale of the Cambridge-based design software and semiconductor company, to Nvidia in Silicon Valley, has become a greater focus as the tech and automotive industries persevere to confront disruption. of the global shortage of potato chips.

“What distinct nation states need is a positive amount of critical core technology or critical core customers to tap into to be an significant part of the global supply chain,” said Nigel Tone, CEO of Graphcore, the UK’s most eminent startup.

Many in the tech industry are baffled by the focus of much of the government’s attention on the coming of a little facility in South Wales said to be worth less than $100m, rather than the debate over the coming of Arm, which is widely seen as a British facility. Tech companies are the “jewel in the crown”, or the multi-billion-dollar investment required to attract semiconductor manufacturers like Intel to the UK.

Newport Wafer Fab, which has produced silicon chips, the bare bones on which processors are built, under various guises since the beforetime 1980s, employs 450 people. Its low-quality chips, a far sob from what is available in the world’s largest and most sophisticated chip makers, are shipped overseas to countries such as China and Malaysia for processing into chips, as there are no such facilities in the UK.

“We’re not talking about the bleeding edge here,” said Wayne Lamm, a semiconductor analyst at CCS Insight. He added that because similar chip technology is “easily available” in China, Newport’s technology “is not worth fighting for.” “It’s more of an issue of national pride than something that potentially poses a threat to national security.”

Newport Fab
Newport Fab Factory in Wales. Nexperia, a China-owned company based in the Netherlands, said it ‘protected’ the factory’s role in the UK chip industry

However, concerns have been raised by people, including Ciaran Martin, the previous CEO of the National Cyber ​​Security Center (NCSC), who told The Telegraph that semiconductor production was a “first-class strategic issue”.

Tom Tugendhat, chair of the House of Commons Foreign Affairs Select Committee, said in a recent House of Commons debate that Newport’s role as a partner with Cardiff University on designs for 5G radar defense systems put the company “in the national security bracket”.

Downing Street declined to say what prompted the unused review. But the spokesman added: “We will not hesitate to take further measures if necessary.”

Nexperia said it would work with the government’s investigation but rejected suggestions that its listed parent company, Wingtech, is owned by the Chinese state. It said it only took control of Newport following the plant ran into financial trouble earlier this year and pledged to invest $40 million to $45 million over the next 12 months to increase production capacity.

“Contrary to media and parliamentary reporting, Nexperia has in fact protected the Newport Fab’s role in the UK semiconductor industry,” the company said.

For months, Johnson has taken a two-pronged approach to Beijing, vacillating between a dovish stance, which has seen Chinese telecoms company Huawei expelled, and warm words about the need to persevere to attract Chinese trade and investment.

Under the Companies Act 2002, which still governs takeovers, companies must either have an annual turnover of over £70m or a positive market share to be ‘called’ for reasons such as national security – neither of which applies to Newport.

The unused system, established under the recent National Security and Investment Act, will create from 2022 a much lower threshold for intervention, which can be done retroactively.

Going forward, officials are reviewing policy toward the broader semiconductor sector following “increasing geopolitical actions leading to commotion,” according to a Whitehall document seen by the Financial Times.

The Department of Culture and Media is concerned that the rise in nationwide interventions in the UK’s semiconductor manufacturing sector has raised “challenges to the UK’s coming competitiveness”.

Officials have launched a review to ensure the UK has a reliable and reliable supply of semiconductors to apprehend opportunities in lofty-potential areas and protect the country from potential security risks.

Establishing a globally competitive semiconductor manufacturing facility in the UK would take tens of billions of dollars of investment.

Even if there is a government appetite to offer the kinds of multibillion-dollar incentives that Intel is seeking from the European Union to build a series of unused chip factories on the continent, UK technology executives are skeptical that the plant in Newport could form the basis of such an enterprise.

“Can you turn that around [business] In a Taiwan semiconductor manufacturing company? Given a trillion dollars and a heap of nonexistent expertise, one semiconductor industry executive said, adding that the Newport controversy reflects a “conclude government-level misunderstanding” of the technological and logistical complexities of supplying chips.

Stuart Chapman, a technology investor in Draper Esprit, like Graphcore, the AI ​​chip maker in which Draper is investing, said the UK should instead focus on nurturing the next generation of deep tech companies.

Hermann Hauser, the veteran Cambridge technology investor who campaigned against the proposed sale of Arm, has raised no such concern about Newport. He told the Financial Times that investment from the US and China in British technology could be beneficial, depending on the circumstances.

“There are only three regions in the world that stand a chance of technological supremacy: the United States, China and Europe,” said Hauser. “For semiconductors, this means Britain joining a 145 billion euro initiative to establish an self-reliant European capacity in the semiconductor industry.”


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