Review of the acquisition of the Newport Wafer Fab Site by Nexperia BV

NMI is the UK’s semiconductor trade association. We were established in 1996 and have the on-going health and best interests of the sector at the very heart of what we do daily. We have therefore been following the review and subsequent ruling with keen interest.

NMI recognises, and supports, the UK Government’ responsibility in regard to national security and the intent of the National Security Investment Act.

On 16th November 2022, the Secretary of State for Business, Energy and Industrial Strategy (“the Secretary of State”) made a final order pursuant to section 26 of the National Security and Investment Act 2021 (“the Act”),

In its notice of final order, the Department for Business, Energy and Industrial Strategy (BEIS) said the Secretary of State considers the risk to national security relates to:

“Technology and knowhow that could result from a potential reintroduction of compound semiconductor activities at the Newport site, and the potential for those activities to undermine UK capabilities.”

BEIS also made the forward-looking statement that “[the] location of the site could facilitate access to technological expertise and knowhow in the South Wales Cluster (“the Cluster”), and the links between the site and the Cluster may prevent the Cluster being engaged in future projects relevant to national security.”

This review was highlighted as being ‘special ‘due to the fact that it was retrospective’. The time taken to reach this decision after three reviews and the lack of transparency of the process has been widely criticised.

Situation

NMI represent over 90% of the UK semiconductor manufacturing facilities and much of the associated supply chain. We have been contacted by a number of concerned NMI members regarding the decision, requesting support to obtain additional information from the UK Government.

In preparation, we have consulted widely with our industry members and other domain technical experts to gain a nuanced understanding of the technology and markets of Nexperia Newport. As a result, we have found that the facility manufactures power switches for the automotive and consumer market. These products are important circuit elements yet pose no known security threat to operational technology.

Additionally

We understand from the published response that there were guarantees provided to address future concerns about the company entering into compound semiconductor activities, one of which was to provide the UK Government direct control and participation in the management of Newport.

We have therefore found no evidence that supports a current or future security threat as expressed by UK Government in its ruling.

NMI has been in contact with BEIS on behalf of its members and the implications of the decision to try and establish additional facts and insight. After repeated attempts, BEIS confirmed that the National Security Team is unable to comment further on the Secretary of State’s decision. However, they have commented that the intervention was not based solely on current capabilities at the Newport site and that this decision should not be taken as indicative of future interventions in the sector.

Our NMI members are therefore asking questions such as:

Can such a crucial and important decision be based on speculation and ‘what if’s ‘?
What will be the future viability of the site, it’s staff and capability in the region?
What does this mean for attracting new foreign investment into the UK?

Welsh MP Ruth Jones has also called on ministers to publish the security assessment which led to the decision and to reveal what discussions UK Business Secretary Grant Shapps has had with the Welsh Government and Newport City. This has been rejected.

The lack of transparency remains of high concern as this undermines trust between investors, industry and the Government.

In conclusion

Our NMI members are concerned about the opacity of the decision and the reluctance for UK Government to discuss this case directly with stakeholders. They can see no evidence to back claims of a National Security threat now or in the future.

Significant concerns therefore remain regarding the implications of the decision made under the claim of the National Security and Investment Act. Whilst the need for such an act is understood and necessary, with all the experts and experience at our disposal we cannot identify where security concerns may arise – either now, or in the future. As a partner to both industry and Government, with the long-term interests of the sector and the economy in mind, we are worried that this decision may have wider unintended consequences.

Near to mid-term, the future viability of the site is also being questioned with potentially hundreds of jobs, and the captive capability at risk. The level of ongoing investment required to maintain a facility of this size is substantial and there is a significant risk that continued, sustainable investment may not be available.

On behalf of our NMI members, and the overall UK semiconductor sector interests in mind, we will continue to pursue a dialogue with Government on this subject and semiconductors in general.