Britain’s biggest microchip plant ‘will shut down’ if takeover blocked

James Titcomb
Sat, March 25, 2023 

nexperia - Matthew Horwood/Getty Images

The Chinese-backed owner of Britain’s biggest microchip plant has claimed the facility will be forced to shut down if the Government successfully blocks its takeover.

Nexperia has argued that Newport Wafer Fab would lose £170m a year and face a staff exodus that will render the factory unviable if the Chinese-owned company is forced to sell it.

The Government has ordered Dutch company Nexperia, which is owned by China’s Wingtech, to sell Newport Wafer Fab, reversing the 2021 takeover, on national security grounds.

Nexperia is now taking the Government to court in an attempt to overturn the decision, enlisting Lord Pannick, the high-profile barrister representing Boris Johnson in his Partygate defence.

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

Newport Wafer Fab factory - Crown Copyright

“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.”

Newport Wafer Fab made a £13m loss in 2020, the year before it was acquired, when production was disrupted by the pandemic. Nexperia is yet to file accounts for the following year, which are now almost three months overdue. The plant employs more than 500 people.

Investors have been circling the plant in anticipation of Nexperia being forced to sell it. The taxpayer-backed Automotive Transformation Fund has also held talks about supporting the plant under new ownership.

In November Grant Shapps, the former business secretary, told Nexperia to sell the 86pc of Newport Wafer Fab it acquired in July 2021, following a “detailed national security assessment”.

Nexperia has argued that the order threatens jobs and shows “that the UK is closed for business”. It has sought a judicial review on the decision, which is expected to be heard in the coming weeks.

The Government blocked the deal due to fears that the company could restart work on cutting-edge compound semiconductors, which “could contribute to undermining UK capabilities”. Newport Wafer Fab’s position as part of the South Wales cluster of semiconductor firms could also prevent work on national security projects in the area, officials said.

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

The filings 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.

The company paid Lord Pannick £450,000 between September and December last year, according to Parliament’s Register of Interests.

A spokesman said: “Nexperia applied for a Judicial Review earlier this year. Whilst we await the court’s hearing and decision in the coming months, Nexperia continues to focus on protecting the interests of its UK employees and delivering for its customers.”