Tories publicly clash over Chinese takeaway

28 June 2021

8:00 PM

28 June 2021

8:00 PM

Efforts to rid Huawei from Britain’s 5G mobile network were a constant feature of Tory politics last year. The question of whether a company with links to the Chinese state should be involved in such sensitive infrastructure dominated much of 2020, culminating in Oliver Dowden’s announcement in November of a ban on Huawei in 5G networks. It followed a long-running campaign by the 40 or so MPs who belong to the China Research Group, run by Tom Tugendhat, the chairman of the Foreign Affairs Select Committee.

But now it appears that a similar fight could be looming over another Chinese tech giant. Kwasi Kwarteng and the department of business (BEIS) appear to not be heeding the example of Dowden’s culture ministry, judging by the former’s reluctance to intervene in the takeover of British semiconducter company Newport Wafer Fab (NWF). The firm, which is based in Wales, is currently in the crosshairs of Chinese company Nexperia – a 100 per cent owned subsidiary of the Chinese-based Wingtech Technology. In March Nexperia installed two board members at NWF and has now begun the due diligence process.

Ten days ago Tugendhat published online a little-noticed letter to Kwarteng, outlining his concerns. He notes that ‘having the UK’s leading 200mm silicon and semiconductor technology development and processing facility being taken over by a Chinese entity – in my view – represents a significant economic and national security concern’ especially given the worldwide shortages in semiconductor production at present.

Tugendhat asks for Kwarteng to reconsider advice to NWF about whether the takeover would trigger a call-in under the NationalSecurity and Investment Act and cites two similar attempted transactions in Italy and South Korea. The former saw the Italian government block Shenzhen Investment Holdings from buying a controlling stake in Milan-based semiconductor company, LPE. The latter involved Beijing-based Wise Road Capital’s efforts to acquire South Koreansemiconductor manufacturing company MagnaChip being referred to both the South Korean government and the USCommission on Foreign Investment (CFIUS).

Since Tugendhat’s letter was published, further developments have occurred in the MagnaChip case, with the Biden administration now looking to block the sale. The US has previously shown a reluctance to permit similar takeovers, with CFIUS blocking takeover bids for Micron, Lattice Semiconductor, Aixtron and Qualcomm since 2015. But Magnachip is different; a small company, focusing on technology that is not a US core competence and with little, if any American presence. Considering the pattern of recent years, in which America imposes new restrictions on China that Britain ends up adopting at a later date, could the MagnaChip case figure in debates here in Britain about the future of NWF?

As the Beijing to Britain briefing service points out, it is of course noteworthy in itself that the chairman of the Foreign Affairs Committee has felt the need to go public with his concerns over this takeover, having clearly already attempted to raise them in private. Clearly the back channels between departments are not working as well as they should be, with Britain’s overall approach to China (still) being fragmented. Given Tugendhat’s past success in campaigning on Huawei, Steerpike suspects other Tories will start to chip in shortly with their own concerns too.

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