Briefing: Takeover of Newport Wafer Fab


Last updated: 7 June 2022


Key points

  • Newport Wafer Fab is a silicon and compound semiconductor foundry in Wales which was bought in July 2021 by Chinese-owned firm Nexperia. On 25 May 2022, the Government announced it had called in the transaction for review under the National Security & Investment Act.

  • As well as being the UK’s largest semiconductor plant, Newport Wafer Fab was one of the anchor companies for the UK’s first compound semiconductor innovation cluster, CSConnected.

  • As the chip foundry for CSConnected, NWF was a partner in at least 14 Innovate UK programmes to develop gallium nitride (GaN) and photonics devices, including a project to develop high-frequency GaN designs for 5G defence radar systems.

  • China’s 14th Five Year Plan (2021-2025) specifically identifies compound semiconductors as an area where China could take the lead in a field where it isn’t as far behind as it is in conventional silicon-based chipmaking.

  • Nexperia is owned by the Shanghai-based Wingtech. Almost 30% of Wingtech’s shares can be traced back to the Chinese government entities, investment screening specialists Datenna found.

  • Shanghai’s 2021-2025 Science & Technology Plan focuses on building the silicon carbide and gallium nitride compound semiconductor industry, with ambitions for a “silicon carbide valley”.


What has happened?

  • March 2021: Chinese-owned firm Nexperia installed two of its directors on the board of Newport Wafer Fab following a “contract dispute”. 

  • May - June 2021: The Foreign Affairs Committee wrote to BEIS twice expressing concern over the deal. The Secretary of State for BEIS, Rt Hon Kwasi Kwarteng MP, declined to intervene and stated that it is for the Welsh Government to decide on matters of economic development.

  • July 2021: 100% of shares of Newport Wafer Fab were acquired by Nexperia for £63m. 

    • Nexperia is 100% owned by Chinese firm Wingtech. 30% of Wingtech’s shares can be traced back to Chinese government entities. Given semiconductors have been designated as a strategic industry in China, the industry is subject to a high level of state influence.

  • July 2021: The Prime Minister agreed to a review led by his national security adviser, Sir Stephen Lovegrove.

  • August 2021: A British consortium of nine companies claimed they were willing to step in with up to £300m of investment if the deal was blocked.

  • January 2022: The National Security and Investment Act comes into force, giving the government powers to scrutinise and intervene in business transactions, such as takeovers, to protect national security. Semiconductors fall under ‘Advanced Materials’ - one of the 17 security-critical sectors.

  • April 2022: Politico reports that the NSA has concluded that there were not enough security concerns to block it. The Government responds that it is still "considering the case and no decisions have been made”. It is not clear if the deal has been officially “called in” under the National Security and Investment Act. The decision is now expected to coincide with the publication of the UK’s forthcoming semiconductor strategy.

  • April 2022: Nine US Congressmen write to President Biden expressing their concern over the deal.

  • May 2022: Kwasi Kwarteng announces that he has called in the acquisition, triggering a 30-day review period.

  • May 2022: The Commons BEIS committee opens an inquiry into the UK’s semiconductor industry.



Why is Newport Wafer Fab important?

Ciaran Martin, former head of the National Cyber Security Centre said in an interview with The Telegraph: “It is about whether we have sufficiently good, reliably Western capabilities of our own. So on many fronts it's a more important decision than Huawei.” 

Sovereign capacity

Newport Wafer Fab (NWF) is the UK’s largest semiconductor fabrication plant. It manufactures silicon wafers and compound semiconductors. The UK only has around 15 semiconductor manufacturers, and only 6 silicon and compound semiconductor fabs.

As has been reported, there is an ongoing global shortage of semiconductors which is expected to last until at least the end of 2022. The US, EU and South Korea have designated semiconductors as a critical technology, and blocked takeovers including MagnaChip in South Korea.

Graphic by CS Catapult

Compound semiconductor cluster

Newport Wafer Fab was the open-access wafer fab at the heart of the Welsh “Compound Semiconductor Connected cluster”. The CSConnnected cluster aims to be the UK’s leading hub for compound semiconductor development. The cluster members generate more than £600 million in revenue each year between them.

In 2021, the Government published its Innovation Strategy which identified the UK’s “potential to become a leading designer and manufacturer of compound semiconductor chips and technologies” as part of our national quantum and photonics industry. It notes that UK companies in clusters in Wales, Bristol and Cambridge could play “an increasingly central role in a supply chain of acute geopolitical importance”.

In partnership with the wider Welsh CS Connected cluster, NWF has been the recipient of millions of pounds of UK Research and Innovation funding, including:

  • A £43m project to develop the CS Connected cluster from the UKRI’s flagship “Strength in Places” fund.

  • Funding for the development of GaN on Silicon semiconductors, supported by the UKRI’s ‘Automotive Transformation Fund: moving the UK automotive sector to zero emissions’. 

Since the takeover, at least one firm has complained that its contract with NWF was abruptly terminated.

Military applications

As part of CSConnected, NWF signed a £5.4 million agreement with Innovate UK to develop RF MMIC high-frequency gallium nitride designs for defence 5G radar systems.


Why is China interested in compound semiconductors?

“Liu’s strategy relies mainly on chips known as compound semiconductors, or third-generation chips…compound semiconductors present a novel approach, offering China the chance to take the lead in a field where it isn’t as far behind as it is in conventional chipmaking.”

Bloomberg article on China’s semiconductor strategy, July 2021.

  • China identified semiconductors as a strategic priority in its Made in China 2025 (MIC2025) industrial strategy. Its national semiconductor strategy is overseen by Liu He, one of China’s Vice Premiers and a powerful economic advisor to Xi Jinping.

  • China’s 14th Five Year Plan (2021 - 2025) specifically targets making breakthroughs in compound semiconductors.

  • Compound semiconductors (also known as third-generation chips) differ from standard silicon chips by combining two or more elements from the periodic table to form a compound, such as gallium nitride or silicon carbide.

  • Compound semiconductors are used where silicon can not operate, such as high power and very high frequency radio equipment. Use cases include sensors for facial recognition, radar and power chips for electric vehicles and quick-charging stations, where the compound materials offer speed and power improvements over standard silicon chips.

  • Innovation in silicon chips is about chasing Moore’s law by trying to shrink the nanotechnology to make more advanced semiconductor chips. But in compound semiconductors, the nanometre size of the wafer is not a relevant measure: the crucial aspect is the development of advanced compound semiconductor materials.

  • Nexperia’s owner Wingtech is based in Shanghai, home of China’s chip industry and its growing electric vehicle industry.


Further reading:




UK-China strategy, Digital ChinaChina Research GroupAnalysis