Nexperia Claims Newport Wafer May Close If Sale Goes Ahead

Newport Wafer Fab may become commercially unviable if UK government insists on its sale under national security legislation, according to current owner Nexperia, which is challenging the decision in court.

Britain’s largest remaining semiconductor fabrication plant has become a pawn in the wider battle over Chinese access to technology. It was acquired by Dutch company Nexperia in 2021 for £63 million ($76 million), but the UK government intervened last year to force the undoing of the sale because of concerns over Nexperia’s ultimate owner, Chinese outfit Wingtech.

At the end of last year, Nexperia confirmed it was seeking legal assistance in order to challenge the government’s decision in a judicial review, and these latest claims come from a document in its case filed in the High Court.

Should Nexperia be forced to sell the business, it would "decimate Newport’s value proposition even in the event that a viable alternate buyer and customers could be found," says the court filing seen by The Register.

The Statement of Grounds filed by the company adds: "This scenario 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. Nexperia's forecasting in this scenario projects a cash flow deficit of more than £170 million 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."

The UK government announced in November that it was ordering Nexperia to sell off at least 86 percent of its interest of Newport Wafer Fab within a specified period, using its authority under the National Security and Investment Act 2021 (NSIA).

It considered the acquisition a risk to national security because of technology and know-how that could result from a "potential reintroduction of compound semiconductor activities" at the Newport site, and because the location of the site might facilitate access to broader technological expertise and know-how in the surrounding area (the "South Wales Cluster").

For its part, Nexperia said it did not accept the national security concerns raised, and pointed out the acquisition had cleared two previous security reviews.

Giving evidence to a committee from The Department for Business, Energy & Industrial Strategy (BEIS) last summer, Nexperia's UK country manager Toni Versluijs had complained about the "disinformation" regarding its takeover of Newport Wafer Fab.

"If you look at the facts, then Nexperia saved, actually, Newport from bankruptcy," Versluijs said, referring to £160 million [about $190 million] of investments that it had already made.

He said there had never been a compound semiconductor production line at the site, although there had been ambitious plans for one, and these could still be realized with the right backing.

He also warned at the time that many of its 500 plus employees at the Newport site were unhappy with the uncertainty caused by the government's actions.

Newport Wafer Fab currently manufactures chips using a 200nm production process that is far from the cutting-edge 5nm technology used to make the latest processor chips. Updating it to newer tech would require significant investment from any new owner, one analyst previously told us.

• Brit chipmaker issues warning about inventory glut
• Questions asked about Chinese takeover of UK tech company
• Nexperia calls in the lawyers to save Welsh chip fab deal
• Arm founder says the UK has no chance of tech sovereignty

Nexperia has hired international law firm Akin Gump and barrister Lord Pannick KC, recently in the news for representing disgraced former Prime Minister Boris Johnson, to assist with its High Court appeal against the government decision.

Meanwhile, the UK still lacks any official semiconductor strategy, despite this being cited as a priority for some time. When we last asked the government about it earlier this month, a spokesperson told us:

"We are committed to supporting the UK's vitally important semiconductor industry. Our forthcoming semiconductor strategy will set out how the government will improve the sector's access to the skills, facilities and tools it needs to grow. The strategy will be published in due course."

A Cabinet Office spokesperson told The Register: "It would be inappropriate for the Government to comment on any ongoing litigation proceedings." ®