It is nearly a year since one of Wales’ leading technology companies, Newport Wafer Fab (NWF), was acquired by Chinese-owned firm Nexperia.
The Amsterdam-based tech firm, part of Shanghai listed Wingtech, bought NWF in a reported £63m deal having previously had a minority 15% stake and a clause giving it the right to acquire the entire business in the event of customer supply issues.
It was positioned as a deal safeguarding 500 jobs - yes true - but was it in the best interests of the UK economy and an asset of arguably national strategic importance remaining in UK ownership?
On that, the answer is a resounding no.
With the era of unfettered globalisation stalling, with increasing geopolitical tensions, we will see a dash to even greater sovereign production security - from food and energy to technology.
In a way reshoring and closer to home supply chains - although due to the complexity of materials and components in many products it will mean that no state can be truly self-sufficient - could also help reduce emissions.
But where does a chip making facility in Newport, which over the years has gone through numerous boom and bust ownership cycles, fit into this narrative?
The business was acquired by Nexperia from a management buyout buy-in team (Neptune Six) that had itself bought the fab in 2018 from German tech giant Infineon; which after all operated as it a closed fab and not an open access operation allowing others firms to use it for their chip production requirements - a business model that would presently fail a strategic national importance test.
Fast forward and one has to think of NWF (now trading as Nexperia Newport) not so much as what it is presently, but what it can become. And that is, with further investment, being at the heart of a sovereign indigenous supply chain providing vital tech components, as the UK economy migrates from a hydrocarbon to a greener and net zero economy.
For example if the UK is to adopt mass electric vehicles it will need a UK-wide network of public access vehicle charging points at scale.
And to power vehicles in minutes, rather than currently often half an hour or longer, they will need to be powered by silicon carbide and gallium nitride, which is where NWF was heading under its previous owners as a compound seminconductor focused open fab.
The one party communist state of China aims by 2025 to be a global leader in ten core industries including semiconductors - where it has it a goal to meet 70% of its demand through domestic supply.
Wingtech is currently building a $2bn chip fab in Shanghai with five times the capacity provided currently by NWF. The fab, which is scheduled to open later this year, will operate at 300mm as opposed to 200mm wafers (NWF). This could jeopardise the future of the NWF site, since building power chips at 300mm is significantly cheaper than at 200mm. The 300mm wafer yields almost three times the number of chips per wafer than 200mm wafers.
Having reached its indigenous supply chain production goal could the Chinese see NWF as surplus to requirement?
The national interest issue test applies not just on a UK level, but more poignantly the Cardiff Capital Region, with the need for an open access chip maker at the heart of efforts to create a new hi-tech compound semiconducter cluster for the region employing thousands.
The growing network of regional industry partners including tech firms such as IQE, SPTS Technologies, Microchip and yes Newport Wafer Fab, pre the Nexperia deal. Its early stage research capacity is being backed with partners in Swansea and Cardiff universities. It is also being supported by the Welsh Government the Cardiff Capital Region’s £1.2bn City Deal.
The cluster’s industrial chain goes from wafer manufacturing right through to packaged chips, providing a capability in next generation semiconductors which are going to be at the heart of virtually every industrial vertical imaginable, including aerospace, automotive, electric vehicles communications, fibre optics, data centres 5G, healthcare medtech and robotics.
A core theme from the semiconductor community within the UK has been the need for open access compound semiconductor fabs - providing sovereign chip capability.
What cannot be allowed to happen is seeing the UK losing its current leadership position in compound semiconductor technology and being left at the mercy of other countries for its supply of economically sensitive chips.
It is also a sector on the rise and has huge job creating potential for the Cardiff Capital Region. For every direct compound semiconducter job created nearly a further six are generated in the wider economy - according to research from the Semiconducter Industry Association.
While things don’t always go in straight lines, the cluster has a target of creating 5,000 direct jobs (currently 1,700), which based on that multiplier would create a further 30,000 in the wider economy.
So, essential to the development of the cluster is an open access chip fab which is exactly the role NWF was seeking to play prior to the Nexperia takeover.
I was baffled when the Competition and Markets Authority (CMA) didn’t intervene to review the acquisition on market domination grounds - it had a four month window to act which has now closed.
With its smaller Manchester fab, Nexperia currently controls more than 65% of the large scale power chip manufacturing capacity of the UK. The only other large scale plant is owned by US firm Diodes Inc in Greenock, Scotland. So, it is frankly staggering to think that the CMA didn’t think this was enough of a market dominating position to review the acquisition.
The UK Government’s Business Secretary Kwasi Kwarteng did look at the acquisition and decided there was no issue. Prime Minister Boris Johnson then asked his national security adviser Sir Stephen Lovegrove to examine the sale of the NWF, but that report has yet to see the light of day. Last month Westminster’s Foreign Affairs Committee, chaired by Tom Tugendhat, demanded an explanation as to why the review hasn’t been concluded.
It would seem there is a split in the UK cabinet over whether to intervene or not, by evoking the recently introduced National Security and Investment Act. The legislation gives the UK Government the ability to rule Nexperia’s acquisition null and void with a resolution of it being offered for sale at the price it acquired the business for. So, it is high time the UK Government intervened and one has to ask if NWF was say based south-east of England would it be acting with seemingly the same indifference?
There would be strong ‘indigenous’ new ownership interest to acquire the fab and take it to the next level at the heart of thriving compound seminconducter cluster benefitting not just the economy of the Cardiff Capital Region, but that of Wales and the UK as a whole.
There is also global investor appetite to finance the scale-up of compound semiconducter foundries like NWF. It could also be backed by the Welsh Government to ensure a public ownership stake.
Having got its £16m back from the Nexperia acquisition - having backed the takeover of NWF by Neptune Six from Infineon - it would be a smart move to back a business with significant growth potential.
