Why did the French Competition and Markets Authority not examine the Chinese takeover of Newport Wafer Fab
Is there still a possibility that the takeover of one of Wales’ leading tech companies, Newport Wafer Fab (NWF), by Chinese firm Nexperia will be blocked?
The Amsterdam-based company owned by Shanghai-listed Wingtech Technology acquired over the summer the UK’s largest chipmaking factory, based in Newport, at a price that many saw as a drop. price tag of Â£ 63million.
Nexperia took a 15% minority stake in 2019. Two years later, NWF found itself forced to raise the necessary funds to invest to increase the production of 200mm chips to meet customer orders for Wingtech . It is understood that Nexperia was to provide support for the fundraising and that Neptune Six, which itself bought the foundry from the German company Infineon as part of a management buy-in management buyout in 2017, had also identified the investment required from donors.
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Having already appointed two of its own directors to the NWF board, however, Nexperia was in a position to organize a takeover – due to supply contract issues.
Despite concerns that a strategically important British company will fall under China’s control, Secretary of State for Business, Energy and Industrial Strategy Kwasi Kwarteng has chosen not to intervene For safety reasons.
While opponents of the deal were even more enraged, in particular Foreign Affairs Committee Chairman Tom Tugendhat, who said Chinese ownership of the NWF “represents a significant economic and national security issue,” the Premier said. Minister Boris Johnson then announced that his national security adviser, Sir Stephen Lovegrove, would look into the case.
It was to be a relatively quick turnaround, but three months later and still radio silence – although there was speculation that it could be delayed until the New Year, when the new National Security Act and the The investment will have increased the scope of agreements that can be reviewed.
Although pressured by former US President Donald Trump to remove Chinese tech company Huawei from the UK’s 5G network, it appears the UK government has little appetite to stoke further tensions with the Chinese, especially then that it seeks to secure new markets for UK exporters. following leaving the EU.
However, if the UK government were serious about seeing the deal stalled, without falling into a tricky geopolitical thread, it could have indicated a review of the market and competition through the Independent Competition and Merger Authority ( CMA).
If the CMA, which acts independently of the government, stepped in and blocked the deal, Mr Johnson could say to the Chinese, “sorry guys, this is not a security issue, but a good old market and a competition issue. and it would be the same if an American or a German company had acquired NWF ‘.
The CMA does not comment on whether it intends to review mergers and acquisitions, before confirming what could be a staged review process on its website.
But how strong is a review of the Nexperia acquisition from a market and competitive perspective? Well, with its acquisition of NWF and its Stockport plant, it now controls over 65% of the UK’s high-volume silicon chip manufacturing capacity. This is a dominant position in the market which suggests that there is a need to respond. So, the question why did the CMA not intervene?
The question also arises as to whether the foundry will remain an open access facility, so that companies without a foundry can see their orders fulfilled.
However, if Nexperia were to become a closed, vertically integrated facility serving only its own business needs, it would be no different from when the Newport smelter was owned by Infineon.
As for the Welsh government, it has apparently shrugged its shoulders on the issue of Chinese property – although it does not have the power to intervene for reasons of security and national interest.
By lifting its charge on the property and assets of NWF, it enabled Nexperia to acquire 100% of the property.
In return, the Welsh government recovered all of the Â£ 13million and future interest it had provided to Neptune Six to acquire NWF from Infineon under a deal led by the CEO of IQE, Dr. Drew Nelson.
However, the Cardiff Capital Region’s compound semiconductor cluster, which aims to create thousands of new, highly skilled jobs, no longer has a local chipmaker at its core.
As well as NWF, the growing network of regional industrial partners, including technology companies such as IQE, SPTS Technologies and Microchip. Its early stage research capacity is supported by partners from Swansea and Cardiff universities. It is also supported by the Welsh and UK governments through its Â£ 1.2 billion Cardiff Capital Region City Deal funding, which supports the cluster.
The cluster’s industry chain spans from wafer manufacturing to packaged chips, delivering capacity in next-generation semiconductors that will be at the heart of virtually every industry imaginable, including aerospace, automotive, communications with electric vehicles, fiber optics, 5G data centers, medical technologies and robotics.
The compound semiconductor cluster recently received a Â£ 43million project under UK Research and Innovation’s Strength in Places (SiP), the largest SiP project to date.
Now under Chinese ownership, will NWF continue to be an inclusive and collaborative actor in the cluster?
For its part, Nexperia claims that if it had not intervened, the NWF would have faced administrative proceedings.
In a recent statement, he said: âWe have been a client of Newport Fab for some time and invested equity in the company in 2019 as a second shareholder to ensure they can remain solvent. In return for this significant financial commitment, as any sane business would have done, she said she asked for protective rights, including the right to appoint board members if the business ran into financial difficulties again.
“It wasn’t until they came to us and told us that they might collapse in the first quarter of this year, however, that we decided that we had no choice but to intervene, after which we voluntarily paid off Newport’s debt to the Welsh government, saved the company from a potential administration, secured 500 jobs and lifted the wage freeze on its employees.
All eyes are now on the CMA, which only has a short window before a review option expires.
If this is the case, and after a number of reviews, concludes that the agreement is anti-competitive, then Nexperia will have to sell its majority stake at the price for which it acquired it.