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Owners of Newport microchip factory warn it will be forced to close if UK Government blocks takeover

26 Mar 2023 3 minute read
Jaggery / Newport Wafer Fab / CC BY-SA 2.0

The owners of Newport Wafer Fab, the UK’s biggest microchip factory, have warned it will be forced to close if the UK Government successfully blocks its takeover.

Chinese-backed Nexperia was instructed to sell the majority of Newport Wafer Fab in December last year by UK Business Secretary Grant Shapps following a security review.

More than 500 people are currently employed at the plant in Duffryn.

Nexperia is taking the government to court to challenge the decision to block the £63m deal which was originally announced in 2021.

The company, headquartered in the Netherlands but owned by China’s Wingtech, said it did not accept the national security concerns raised.

It argues that Newport Wafer Fab would lose £170m a year and face a staff exodus that will render the factory unviable if it is forced to sell up.

Devastating impact

According to legal filings at the High Court, reported by the Telegraph, Nexperia said a divestment order “would have a devastating impact on Newport’s financial position”.

“Newport would be left with only a single remaining client, and no immediate pathway to return to profitability,” it said. “Nexperia’s forecasting in this scenario projects a cash flow deficit of more than £170m by the end of 2024.

“In the short-term, the plant would require significant capital backing in order to remain solvent during the transition… there is the potential for a staff exodus that would cripple Newport’s production capacity, threatening Newport’s viability as a feasible business.

“For both prospective customers, as well as potential alternative owners of the Newport facility, such a turn of events would decimate Newport’s value proposition even in the event that a viable alternate buyer and customers could be found.”

The company claims the sanctions announced are disproportionate and has accused UK ministers of failing “to enter meaningful dialogue” over the sale and had not responded to its attempts to offer remedies, such as appointing a government executive to the company’s board.

Prized asset

Last year, the Commons Foreign Affairs Committee said the sale of Wafer Fab to a “company with links to the Chinese Communist Party” had resulted in one of the UK’s “prized assets” going to a “strategic competitor” and could potentially compromise national security.

In a report – Sovereignty For Sale: Follow-up To The Acquisition of Newport Wafer Fab – published on April, the committee’s MPs questioned why the UK Government had not used powers in the National Security and Investment Act to intervene.

The Act, which came into force in January, affords ministers the right to step-in on business matters “where there is a risk to national security”.

Nexperia told the court that its chips are “generally for use in household appliances like kettles and toasters”.

The filings also reveal that Nexperia offered a series of pledges that were rejected by the Government, including blocking the export of technology overseas, committing to no military manufacturing, and not to assist with “indigenous Chinese compound semiconductor capabilities”.

They also show that Nexperia is seeking damages if it is successful in its appeal.

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