Yahoo Finance Bailout planned for British microchip giant as China deal comes under scrutiny
Taxpayer funds will be used to rescue Britain’s biggest microchip factory if ministers block its sale to the Chinese under proposals being discussed by a rival bidder.
A US-backed consortium preparing to make an offer for Newport Wafer Fab has held talks with the £1bn Automotive Transformation Fund (ATF) about supporting high-tech research at the Newport Wafer Fab facility in South Wales.
Investors have been put on alert for a potential takeover offer after Kwasi Kwarteng, the Business Secretary, announced a national security review of the plant’s sale to Chinese-owned Nexperia last week.
At least two consortia are believed to have expressed an interest in funding a bid for the plant if this deal is reversed.
The ATF was set up last year to fund investment in electric vehicles and infrastructure, a key plank of the Government’s net zero drive. Earlier this year it put around £100m into BritishVolt, the British battery “gigaplant” in Northumberland.
The fund is believed to be interested in developing advanced microchip technology at the factory that could support fast-charging stations.
Newport Wafer Fab is seen as a potential source of chips made from gallium nitride and silicon carbide, advanced materials that could enable faster and more efficient charging stations than existing silicon technology.
The Government has outlined plans for a tenfold increase in the number of public charge points by 2030. Driving down the time it takes to charge electric cars is seen as essential to encouraging motorists to switch from petrol and diesel vehicles.
Nexperia, which is 100pc owned by the Chinese technology company Wingtech, acquired Newport Wafer Fab for £63m last year.
The plant fell into financial trouble during the pandemic, allowing Netherlands-based Nexperia, which owned 14pc of Newport Wafer Fab, to exercise an option to buy it.
Ministers had initially waved through the deal but Mr Kwarteng last week ordered a detailed review under new national security legislation.
He will be able to reverse the takeover after the 30-day investigation, which can be extended by a further 45 days.
Calls for the takeover to be blocked have grown amid a global chip shortage and increasing concerns over China’s technology ambitions.
A group of US Members of Congress has urged Joe Biden to intervene if the takeover is not reversed, saying the UK should be removed from a security whitelist that allows British investments in America to avoid screening.
One consortium preparing a potential takeover of Newport Wafer Fab is understood to have held talks with Ian Constance, the chief executive of the Advanced Propulsion Centre, which runs the ATF. Money would be offered as grant funding, rather than the ATF taking an equity stake in any takeover.
The consortium has spent months lining up funding and executives to take on the plant. One source said this could include former members of Newport Wafer Fab’s management team. The US semiconductor company SkyWater has been mooted as one potential funder, although it is unclear if the company is currently involved.
Ron Black, the former chief executive of British microchip design company Imagination Technologies, has arranged a separate consortium, saying it could put as much as £300m into the plant. Mr Black said this weekend that he and his partners were still interested in a takeover but would want to be clearer about how the Nexperia deal would be unwound.
Mr Constance declined to comment on any potential funding, but said the fund was interested in funding gallium nitride and silicon carbide projects.
Wingtech’s shareholders include Chinese state investors. Nexperia, which also owns a plant in Manchester, has insisted that it is not influenced by the Chinese state. The Dutch company says it has hired extra staff in Newport and invested £80m in the facility. The majority of its output is currently low-tech power electronics for vehicles and appliances.
Two security reviews, the second ordered by Boris Johnson after the Nexperia deal was completed, concluded that there were not sufficient grounds to block the takeover, but Mr Kwarteng can overrule them. “We welcome overseas investment, but it must not threaten Britain’s national security,” he said last week.
The review was welcomed by Tory MPs who have campaigned for the deal to be blocked.
The ATF is designed to bolster Britain’s electric car supply chains, backing investment in batteries, electric drivetrains, electronics and fuel cells. This is believed to be crucial to prevent British car manufacturing from moving abroad.
Its investment in BritishVolt came alongside a cash injection from real estate investor Tritax Group and asset manager abrdn.
BP, which has outlined plans to invest £1bn in fast charging infrastructure in the UK, is sourcing chargers from Tritium, an Australian company.
Nexperia said last week: “We welcome this opportunity to engage and contribute to an informed debate about our UK activities and investment plans.”
