UKRAINE – 07/05/2021: In this photo illustration, the Newport Wafer Fab (NWF) logo can be seen on a smartphone screen with the Nexperia logo in the background. (Photo illustration by Pavlo Gonchar / SOPA Images / LightRocket via Getty Images)
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LONDON – The Chinese owner of a Dutch chip company looking to buy the UK’s largest chip factory has strong support from the Chinese Communist Party, according to an analysis by Chinese investment screening specialist Datenna.
China’s Wingtech Technology – the owner of Netherlands-based Nexperia, which Newport Wafer Fab will acquire for £ 63 million ($ 87 million) – is under significant government control over Chinese investments through its many shareholders, according to Datenna, who conducts research and acquisitions for governments.
The shifts lead to the State Council’s State Assets Supervision and Administrative Commission, which is a special commission of the People’s Republic of China, as well as special state semiconductor investment funds.
Almost 30% of Wingtech shares are owned by the Chinese government, Datenna found, which exclusively shared the data with CNBC.
Major Wingtech shareholders with ties to the Chinese government are Wuxi Guolian Industrial Investment Co. Ltd and Kunming Industrial Development Equity Investment Fund Partnership, which hold 9.76% and 5.67% of Wingtech shares, respectively.
Data analysis of the 10 largest Wingtech shareholders.
Wingtech and the Chinese government did not immediately respond to a CNBC request for comment. Nexperia declined to comment.
Wingtech is a Shanghai-listed manufacturing company that assembles smartphones and other consumer electronics. In recent years, however, the company has become increasingly interested in semiconductors.
With around 20,000 employees and a market value of around $ 18 billion, it is one of many companies in China that is supported by the Chinese government.
Concerns about selling important assets
On a 28 hectare site in South Wales, Great Britain, NWF employs around 400 people and produces around 8,000 wafers per week. The wafers are thin pieces of silicon on which circuit patterns are printed to build chips. The 200 mm wafers from NWF are mainly used in the automotive industry, which is particularly hard hit by the shortage of chips.
Some UK lawmakers fear that the deal will hand over a rare UK advanced chip manufacturing facility to China. As the global chip scarcity rages on, these factories are widely viewed as strategically important assets for countries. Semiconductors are tiny pieces of silicon, a critical technology used to power everything from cars and airplanes to computers and rockets.
Tom Tugendhat, head of the UK government’s China Research Group and chairman of the Foreign Affairs Select Committee, told CNBC on Monday that he was very surprised that the purchase was not being reviewed under the National Security and Investment Act, which was introduced in April.
“After interacting with partners in the US and around the world, I know that I am not alone,” he said.
“The semiconductor industry sector falls within the scope of legislation, the ultimate aim of which is to protect the country’s technology companies from foreign takeovers when there is a significant risk to economic and national security,” he said.
“When the UK signed the Carbis Bay G7 communiqué, we committed to taking steps to build economic resilience in critical global supply chains such as semiconductors. This appears to be an immediate and very public reversal of that commitment.”
Tugendhat noted that the government “has yet to explain why we should turn a blind eye when the UK’s largest semiconductor foundry falls into the hands of a company from a country with a track record of using technology to create geopolitical leverage”.
A UK government spokesman told CNBC on Monday that it did not consider it appropriate to intervene at this point.
“We will continue to monitor the situation closely and not hesitate to use our powers under company law should the situation change,” said the spokesman. The Enterprise Act was introduced in the UK in 2002 and has significantly changed the country’s competition law regarding mergers.
“We remain committed to the semiconductor sector and its important role in the UK economy,” they added.
Datenna, also based in the Netherlands, believes China is lagging behind other countries in semiconductor technology, but is trying to boost the sector through foreign acquisitions and state investment funds.
According to Datenna, over the past decade the Chinese government, through its state-backed companies, has acquired stakes in an increasing number of European semiconductor companies that have created an interactive map to provide more transparency about Chinese investments in Europe.
Beijing-headquartered Canyon Bridge acquired semiconductor and software design company Imagination Technologies for £ 550 million ($ 763 million) in 2017 after Apple announced it would no longer use the company’s technology in its products.
Elsewhere, the Chinese state-backed semiconductor company Tsinghua Unigroup acquired French chip maker Linxens for $ 2.6 billion in 2018, and Jianguang Asset Management acquired Dutch chip maker Ampleon for around 1.7 billion euros ($ 2 billion) in 2015.
In all of these cases, according to Datenna, it’s easy to see that China is exerting its influence.
In the case of Nexperia, for example, the relatively young CEO Frans Scheper retired early and was replaced by Wingtech chairman Xuezheng Zhang at the beginning of 2020. Wingtech has now taken over the remaining shares.
Meanwhile, in September 2019, Linxens announced the construction of a huge factory and research center in Tianjin, China. The factory is scheduled to be completed in 2021 and will require an investment of approximately 2.1 billion Chinese yuan ($ 325 million). Elsewhere, Ampleon has focused on the aerospace and defense sectors since the acquisition.
Semiconductors are key to China’s industrial policy and are considered a critical sector and technology in which the country seeks to achieve a hierarchy. China has the largest semiconductor market in the world, but only 16% of the semiconductors used are manufactured in the country itself. As part of the “Made in China 2025” plan, the heads of state and government hope that the proportion will rise to 70% by 2025.
Like other countries, China wants to become more independent of chip production instead of being dependent on chips like South Korea, where Samsung is based, and Taiwan, where TSMC is based.
“We see a connection between the Chinese government’s strategy to increase China’s self-sufficiency in the semiconductor industry and the level of government influence in the acquisitions in the semiconductor industry,” said Datenna CEO Jaap van Etten.