Johnson may block Chinese takeover of UK’s largest computer chip maker

Post-Brexit trade adviser Tony Abbott ‘heartened’ by review into takeover of Newport Wafer Fab

Boris Johnson may block a Chinese-owned company from purchasing the UK’s largest producer of semiconductors, a senior government adviser has suggested, as they warned Beijing was on the brink of initiating a new “cold war”.

Tony Abbott, the former prime minister of Australia recruited by Johnson to advise on post-Brexit trade, said he was heartened by a review being launched into the takeover of Welsh microchip manufacturer Newport Wafer Fab by Nexperia and suggested it meant the process could be paused.

Former Australian prime minister, now post-Brexit trade adviser in the UK, Tony Abbott.
Former Australian prime minister, now post-Brexit trade adviser in the UK, Tony Abbott. Photograph: Joel Carrett/AAP

Johnson had asked his national security adviser, Sir Stephen Lovegrove, to look into the sale after previously being accused of acquiescing to the deal by not scrutinising it more closely, particularly given the semiconductor industry’s geopolitical prominence.

China has targeted it as a key technology for the future economy, with more than a trillion chips made a year and global shortages causing big delays for carmakers, both in the UK and abroad.

The global shortage in semiconductors, the microchips that are an essential component in every electronic device in the world, started as a temporary delay in supplies as chip factories shut down when the coronavirus pandemic first hit.

However, while factory production has returned to normal, the shortage has become a global crisis, with a new surge in demand leading to companies fighting to secure the limited supplies coming to the market.

Apple, the world’s biggest buyer of semiconductors – spending $58bn (£41.7bn) annually – was forced to delay the launch of the iPhone 12 by two months last year because of the shortage. Sony has warned it may not hit sales targets for the new PS5 console this year because of chip supply problems, and Samsung, the second biggest producer and consumer of chips in the world, said it might have to postpone the relaunch of its high-end smartphone.

However, the hardest hit sector has been the global automotive industry. Car manufacturers are relative newcomers to the semiconductor industry, as investment in tech-heavy electric vehicles increases, and have found themselves at the back of the supply queue. The biggest automotive players, Toyota and Volkswagen, spend about $4bn annually on chips, making them relative minnows in the supply chain.

Ford has been forced to cancel shifts at two car plants and said profits could be hit by up to $2.5bn this year, Nissan is idling output at some plants in Mexico and the US, and General Motors has warned of a $2bn profit hit.

The battle for chip supplies has also sparked governmental concerns. Earlier this week, Boris Johnson said the UK government would step in to review the purchase of the UK’s largest producer of semiconductors by a Chinese-owned manufacturer, under the new National Security and Investment Act 2021 designed to protect key infrastructure businesses from foreign takeovers.

The shortage is forecast to last until 2023 because new chip factories are highly complex to build and take up to two years to become operational.
Mark Sweney

Nexperia, a Dutch firm wholly owned by China’s Wingtech, announced at the start of July it was acquiring Newport Wafer Fab – the UK’s largest producer of silicon chips, which are vital in products from TVs and mobile phones to cars and games consoles.

Abbott said a special committee was created in Australia called the “foreign investment review board” to look at all “significant foreign investments” – and that such a purchase should be ringing alarm bells.

He said it was “pretty clearly the current purchase that is currently contemplated here in Britain would not go ahead were it happening in Australia”, adding: “But I also think that now that the prime minister’s national security adviser is looking at it here, obviously Britain is moving in a comparable direction.”

Abbott also called on Johnson to be wary of China’s growing prominence, saying the country was “likely to be the challenge of the century with big implications for economics as well as security”.

Speaking at a Policy Exchange event on Tuesday, Abbott said: “After 40 years of bide and hide, China is asserting itself aggressively in what is at best a cold peace and more likely a new cold war, only against a strategic competitor that is far more formidable than the old Soviet Union because it is being increasingly embedded inside the global economy and can bring economic as well as military pressure to bear against its targets.”

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

Abbott said the UK should not stop trading but instead be “much more careful” about becoming economically dependent on China and assess where projects have “far more long-term value for them than us”.

He said China sees trade as “strategic weapon” to be turned “on and off like a tap to reward friends and punish foes”.

In a thinly veiled reference to Newport Wafer Fab, Abbott said that no matter how close relations were between Chinese and British firms, the level of control exercised by the Beijing government meant it would be “unwise” to sell UK tech firms that aid China’s interests.


Aubrey Allegretti

The GuardianTramp

Related Content

Article image
UK firms may buy Welsh computer chip maker if Chinese takeover fails
Technology executive Ron Black says nine companies are willing to join consortium in purchase of Newport Wafer Fab

Jasper Jolly

12, Aug, 2021 @5:14 PM

Article image
Chinese-owned firm acquires UK’s largest semiconductor manufacturer
Tory MP Tom Tugendhat raises concerns about deal in light of global computer chip shortage

Mark Sweney

05, Jul, 2021 @6:13 PM

Article image
Chinese manufacturing slows as trade war with US dents confidence
Sector slows for sixth month amid growing uncertainty over pact with Washington

Phillip Inman

14, Nov, 2019 @6:50 PM

Article image
Trump’s trade war truce with China fragile and hurdle-strewn | Nils Pratley
Despite stock markets surging, timeframe for reaching deal to end hostilities appears too tight

Nils Pratley

03, Dec, 2018 @7:52 PM

Article image
Global economic forecast for 2023? A stormy start followed by a ray of hope
Wall Street predicts turbulent first six months but growing optimism at ebbing inflation, slowing pace of rate hikes and China’s reopening

Graeme Wearden

02, Jan, 2023 @3:44 PM

Article image
US and China agree to reopen trade talks in October
Investors welcome news but remain cautious while Trump shows little sign of ceding

Jasper Jolly

05, Sep, 2019 @12:31 PM

Article image
Donald Trump warns China he won't back down on trade tariffs
US president says he expects to move ahead on plans to raise tariffs to 25% from 1 January

Richard Partington

27, Nov, 2018 @7:36 PM

Article image
China’s move to ease Covid travel restrictions lifts hopes for global economy
Analysts says lifting of many rules may soften impact of higher interest rates and unblock supply chains in 2023

Anna Isaac

27, Dec, 2022 @5:20 PM

Article image
How Trump v Kim can wreck the world economy without a shot being fired | Larry Elliott
Tension is more likely to spark a US trade war with Beijing than a shootout with Pyongyang. China’s debt bubble will burst, with major consequences

Larry Elliott Economics editor

13, Aug, 2017 @11:00 AM

Article image
China voices economic fears about Donald Trump presidency
Beijing’s concerns about a further slowdown in trade come as political uncertainty and social tensions spread anxiety about global economy

Katie Allen

13, Jan, 2017 @6:19 PM