Foreshadowing the new dispute, Prime Minister Boris Johnson ordered a review of the takeover 24 hours after his government said it would not intervene.
Chinese-owned firm Nexperia said it had acquired Welsh-based Newport Wafer Fab, which is Britain’s largest producer of silicon chips. The deal was rumoured to be worth as much as £63 ($116) million but this has not been confirmed and Newport Wafer Fab did not respond to requests for comments.
The takeover was not reviewed under Britain’s new national security legislation, which is meant to stop high-risk foreign takeovers of critical infrastructure firms.
It appeared to fly in the face of the G7’s recent commitment in Cornwall to protect and promote “secure, resilient, competitive, transparent and sustainable and diverse digital, telecoms, and information and communication technology infrastructure supply chains”.
China has ambitions to corner the globe’s production and supply of semiconductors as the silicon-based circuits are the heart of all electronic devices – from telephones and smart speakers to medical equipment and driverless cars.
Under the new national security legislation, the British government can block commercial deals where there is an “unacceptable risk to Britain’s national security”.
While Johnson told MPs the sale was “a very difficult business”, he warned against anti-China sentiment by default.
“I do not want an anti-China spirit to lead to us trying to pitchfork away every investment from China into this country,” he said. “That would be economically foolhardy.”
Speaking to Tom Tugendhat, chairman of the foreign affairs select committee, he said: “We have to judge whether the stuff they are making is of real intellectual property value and interest to China, whether there are real security implications. I think semiconductors are of huge importance to this country, one of the things I wanted to look at immediately was whether we could be more self-reliant. We’re thinking about what to do.”
Nexperia is headquartered in the Netherlands but Australian Liberal Senator James Paterson said no Chinese private company was strictly divorced from Beijing and urged Britain to think again.
“In some countries, like China, there are really no strictly private companies who are immune from state direction.
“Many investors have motivations that are not purely economic, such as the strategic or geopolitical implications of their investments.”
Labor Senator Kimberly Kitching, who is the Australian co-chair with Paterson of the Inter-Parliamentary Alliance on China, said semiconductor manufacturing capability was considered critical infrastructure.
“The Chinese government certainly thinks so, and it has identified semiconductors as one of seven ‘frontier’ technologies in which it is aiming for global supremacy,” Kitching said.
“Britain has just recently passed its National Security and Investment Act, but the old English adage ‘marry in haste, repent at leisure’ perhaps should be pondered,” the senator said.
Britain initially resisted Australian lobbying for it to block Huawei from building its 5G networks but eventually agreed.
A spokesman for the alliance said Britain was making itself more vulnerable to Beijing’s “coercive diplomacy”.
“The UK should be looking to secure its supply chains in critical technologies. Instead, it has allowed its leading semiconductor manufacturer to fall into the hands of a firm under the influence of an authoritarian regime,” the spokesman said.
In April, Italy’s Prime Minister Mario Draghi blocked a Chinese takeover of a semiconductor company and said he backed extending state protection for Italian businesses to prevent them from being snapped up by Chinese interests. (Courtesy Sydney Morning Herald)