New wrinkle emerges in Newport Wafer Fab deal

27 April 2022

The Newport Wafer Fab has been a hot topic in semiconductor manufacturing since mid-last year when the U.K. government paused a bid by Nexperia, a semiconductor firm owned by China-based Wingtech Technologies, to buy the fab, which is the U.K.’s largest chip producer.

While the sale to Nexperia was approved earlier this year, a group of nine U.S. Congressmen, including Michael McCaul, a member of the House of Representatives’ Foreign Affairs Committee, sent a letter to President Joe Biden asking for urgent action to prevent the sale.

The letter from the Congressmen said it was in “the long-term interest of our two countries” to ensure China will not “gain control of any segment of critical supply chains such as semiconductors.” This is particularly important when a fab is located on allied soil, the letter said.

“Failing to object to this transaction would send a disastrous message to our friends and foes alike, and we look forward to supporting these efforts in any way possible,” the Congressmen wrote.

The letter went on to demand that if the sale is not stopped that President Biden should reconsider U.K.’s status on the whitelist of the U.S. Committee on Foreign Investment and all exports to Newport Wafer Fab should be restricted in terms of the technologies and software sold to the fab.

Others have called on British Prime Minister Boris Johnson to take action on the deal, but so far the U.K. government has said it will not interfere.

Controversial decision

The move to allow the sale to a China-owned company was controversial due to the U.K.’s concerns regarding Chinese ownership of the fab and previous issues involving Huawei and national security.

The race to secure capacity is causing vendors globally to invest and develop semiconductor manufacturing on their own to avoid these future issues that may come from future geopolitical issues or another pandemic such as COVID-19. Fabs are being bought and built to meet demand today due to the ongoing chip shortage but also to meet future semiconductor demand that is forecast to grow 5% over the next decade, according to the Semiconductor Industry Association (SIA).

This also has companies turning to new sources to find chips such as electronic distributors and e-commerce chip distributors.

The government allowing the sale is also interesting considering Europe’s own goals of expanding its semiconductor manufacturing to 20% of the global supply by 2030.

Recently, Europe announced the European Chips Act, which would provide about $50 billion in incentives and subsidies to entice manufacturers to build new semiconductor factories in the region. Spurred by this act, Intel Corp. has already pledged some $87 billion over the next decade to build new fabs in Germany as well as a design hub in France and manufacturing and foundry services in Italy, Poland and Spain.

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