Newport Wafer Fab takeover arguments turn nasty

• UK government is reviewing the acquisition of Newport Wafer Fab by Nexperia on security grounds
• Chinese ownership seen as more of a threat to Britain than Huawei’s presence in UK networks
• A government decision is due soon – Nexperia is getting twitchy
• It refutes allegations of withholding finance to get the British company on the cheap
• “Semiconductor supply is a first-order strategic issue”, says security expert

Is it physically possible to contort oneself sufficiently to sling mud while simultaneously doing some serious back-biting? It might be if you do enough yoga… and you can picture the scene right now (metaphorically speaking, of course) as the saga of ‘Nexperia buys Newport Wafer Fab but the UK government steps in to prevent the purchase’ gets ever more acrimonious. 

In July 2021, Nexperia, a semiconductor manufacturer based in Nijmegen in the Netherlands but 100%-owned by Wingtech of Shanghai, China, acquired Newport Wafer Lab, the biggest semiconductor company in the UK, headquartered in Duffryn, Wales. 

Newport Wafer Fab went for the knockdown price of £63m as the deal went through on the nod after next to no due diligence was undertaken. Examination of the circumstances of the sale by regulators or the British government was cursory to the point of negligence after the UK Secretary of State for Business, Energy and Industrial Strategy described the acquisition of a strategically highly important national asset as “so insignificant”. It turned out, not for the first time, that the government minister, Kwasi Kwarteng, was completely wrong.

After the buyout was signed, another suitor emerged. Ron Black, an American with more than a quarter of a century of experience in the global semiconductor and technology industry, contacted Kwarteng and told him that he had up to £300m in funding available from a consortium of 10 investors who wanted to acquire and expand Newport Wafer Fab. Although late to a poker game where all the hands seemed to have been played, Black turned up a powerful trump card. He told the minister that unless it could be unequivocally proven that Wingtech is not a threat to the UK’s national security, the Chinese company “should be considered a risk and, as such, it should not be approved”.

The sum of money involved and Black’s blunt intervention finally caught Kwarteng’s attention (or one of his civil servant’s anyway) and, in due course, he backtracked and invoked the powers he holds under the UK’s new National Security and Investment Act to make a “full national security assessment” and “rewind” the deal. Unfortunately, given the time elapsed and lack of interest or attention as the acquisition progressed, Wingtech had months on end to do what it would have liked with Newport Wafer Fab’s intellectual property and other virtual assets. 

Incidentally, Black bears the scars of doing business with a powerful Chinese company. In 2020, as CEO of the British company Imagination Technologies, he and his directors threatened to resign en masse in protest over an attempted power grab by China Reform Holdings, which describes itself as “a professional private equity investment company” that works together with “central state-owned enterprises and social institutional investors”. Black found out exactly what that meant when, despite the Chinese having made solemn and binding promises to be passive non-interventionist investors, it was revealed that once in control of the company via a boardroom putsch, Imagination would be moved lock, stock and barrel, including its IP assets, to China. The coup failed and the deal folded but the strategic tactics of China Reform Holdings have been remembered.

During the past decade, and more, successive Conservative governments, that have been in power in coalition and as a majority since 2010, encouraged the sale of a range of famous and strategically important British technology companies as they were snapped-up by overseas buyers, a case in point being when Softbank of Japan bought ARM, the world-famous, Cambridge, England-headquartered semiconductor and software design company. More recent geo-political changes have shown that such disinterested laissez-faire attitudes enabled a huge loss of sovereign technology to companies and countries that are no friends of the UK, but are delighted to have had our technology handed to them on a plate, often at fire-sale prices.

Semiconductors are vital to Britain’s economy, and supply-chain disruptions are having a profound effect on their availability. Newport Wafer Fab holds multiple government contracts, some of which involve the nation’s defence and security, and many members of parliament, including Tom Tugendhat, the chairman of the influential Foreign Affairs Committee of the House of Commons and one of the few MPs to have actually served in the UK armed forces, have several times recorded their concern about selling the UK’s strategically important companies to companies in China, Russia and elsewhere.  

Another influential Brit who added his voice to the growing chorus of discontent is Ciaran Martin, the first CEO of the National Cyber Security Centre (NCSC) from before it went operational in 2016 until August 2020. He believes the sale of such a strategic UK asset as Newport Wafer Fab to a company ultimately owned by the Chinese is much more of a threat to Britain than Huawei’s presence here was, because “the future of semiconductor supply is a first-order strategic issue”. He added, “It goes to the heart of how we should be dealing with China.” 

Martin was head of the NCSC when it concluded that Huawei’s involvement in 5G in the UK was a very real threat to national security. That assessment eventually resulted in the ongoing removal of Huawei equipment from the UK’s telecom networks.

At that time, Charles Smit, a board member of, and general counsel at, Nexperia issued a statement saying, “We are not owned by the Chinese state, the Chinese state is not involved in Wingtech.” However, the US company Datenna, which specialises in analysing the convoluted ownership structures of Chinese companies, says at least 30% of Wintech’s shares can be traced back to the Chinese government and the ruling Communist Party. Datenna concludes that despite (or more likely because of) the layered complexities of its shareholding schemes, Wingtech is under “significant state influence”.

Detailed examination shows the involvement of the Assets Supervision and Administration Commission of the State Council, which is a “special commission” of the government of the People’s Republic of China. Among Wingtech shareholders with links to the Chinese government are Wuxi Guolian Industrial Investment and Kunming Industrial Development Equity Investment Fund Partnership.

Under a new prime minister (the UK public is promised there’s one on the way and should be in place by Guy Fawkes Night at the latest), the government’s decision on whether or not to allow the buyout of Newport Wafer Fab is expected to be revealed soon and tempers at Nexperia are fraying as expectations rise that the deal will be disallowed. The Times newspaper reports that Nexperia, which is wholly owned by Wingtech of China, remember, is castigating former board members and accusing them of making “misleading claims” in efforts to affect the outcome of the UK’s national security review. 

Daggers were drawn after Malcolm Penn, once a non-executive director at Newport Wafer Fab, publicly complained about Nexperia’s unacceptable behaviour as the sale process advanced. He also disputed the ‘accuracy’ of evidence given by one Toni Versluijs, general manager and country manager at Nexperia UK, to a House of Commons Committee investigating the semiconductor industry in Britain. Nexperia denied allegations that it “withheld finance” from Newport Wafer Fab with the intent to harm its balance sheet, affect revenues, reduce profits, lower investor expectations and take over the company “on the cheap”.

It’s all getting very nasty, with Nexperia contending that Newport Wafer Fab’s original owners “consistently failed to meet their customers’ requirements, misrepresented the capacity available, exaggerated their future potential and were running out of funds”. This is something Newport Wafer Fab vehemently denies. And so on it goes. Expect even more mud-slinging and back-biting in the weeks to come, and maybe even outright fisticuffs if the deal is knocked back and bodies are twisted into even stranger and more unnatural positions in an effort to win the argument.