The technology executive leading a white knight bid to take over Britain’s biggest microchip factory has vowed to spend up to £300m on the plant amid a battle to prise it out of Chinese control.
Ron Black said a consortium of six companies is ready to step in with a bid for the factory, Newport Wafer Fab, if the Government intervenes to block its acquisition by Shanghai-owned company Nexperia.
Mr Black – who ran Imagination Technologies before leaving the British chip business after a bust-up over an attempted board takeover by Chinese investors – declined to directly call for ministers to block Nexperia buying the factory.
But in his first public comments on the bid, Mr Black said that all technology deals should be strongly considered on national security grounds. He added that investors’ plans would help transform South Wales into a hub for advanced chipmaking.
Mr Black said: “What we’re looking to do is to provide an alternative to the current deal if either Nexperia or the Government conclude that an alternative is necessary."
The ownership of technology companies should be treated as a security issue, according to Ron Black
Credit: David Rose
Nexperia, which is owned by the Chinese tech business Wingtech, acquired Newport Wafer Fab for £63m last month after the plant fell into financial trouble.
Boris Johnson has ordered a national security review of the deal after MPs said the Government was turning a blind eye to the takeover.
Last month, The Telegraph revealed that Mr Black was involved in a consortium preparing a rival offer for the plant.
On Tuesday, Mr Black said he was working with three electronics companies and three financial investors, based in the UK, Europe and the US on a takeover proposal. The group has substantial financial backing and planned to invest heavily in the plant, he said.
Mr Black added that he had spoken to “people around economic development in Wales” and would welcome Government investment as part of any deal.
A new record
He said the acquisition could include a bid that would more than return Nexperia’s investment in the company, potentially up to £100m, and could also include a further £200m of spending to expand the plant’s capacity.
Mr Black said that his consortium’s members “represent a significant amount of investment power”, and would be able to fill current capacity at the factory.
Although he declined to name the companies, he said the three technology companies, two publicly-listed, were looking to secure a regular supply from the factory and were involved in areas such as power supplies, communications and infrastructure.
He added: “These companies are looking for strategic relationships over a long period of time."
Mr Black said the consortium intends to invest heavily to make Newport Wafer Fab the centre of a cluster of companies in South Wales involved in compound semiconductors, a new, advanced material that promises more powerful microchips.
Asia outgrows the US
The consortium is yet to hold talks with Nexperia, Mr Black said. However, he believes the company will come to the table if there are signs that the Government could intervene.
He said: “I think they could change their mind based on discussions with the UK Government.
Nexperia could remain as a minority shareholder and customer, Mr Black added.
Sir Stephen’s review is expected to conclude in coming weeks, but the future of the deal is likely to remain uncertain until January, when stronger national security laws come into force allowing ministers to block foreign takeovers.
While Mr Black did not comment on whether Nexperia’s ownership of the plant was a national security risk, he said the ownership of technology companies should be treated as a security issue.
He said: “The presumption I would always start with is that it’s a national security concern, unless proven otherwise.
"The risk is asymmetric because getting it wrong has devastating potential impacts.”
Nexperia has promised to invest around £40m in the factory and has promised that it will continue to be an employer in the area for “generations”.
The company did not comment on Mr Black’s consortium.
Behind the battle for Britain’s biggest chip factory
When Nexperia paid £63m to swoop on Britain’s biggest microchip plant, the Dutch company was not expecting a political firestorm.
Executives had informed the Government of a possible deal to buy Newport Wafer Fab as early as 2019, and no national security concerns were raised by civil servants at the Department for Business, Energy and Industrial Strategy.
Nexperia and its predecessor companies – NXP and Philips – had been based in the UK for decades, operating a plant on the outskirts of Manchester once owned by British electronics manufacturer Mullard.
Most crucially, Newport Wafer Fab, a South Wales plant dating back to 1982, did not obviously seem to own the sort of protected technology that typically comes up in national security conversations.
In numbers: The world’s fragile microchip chain
But rather than being received as a local boost, the sale has threatened to become a diplomatic nightmare for both the Government and the plant’s new owners – amid fears the deal will hand a vital part of Britain’s tech infrastructure to a Chinese buyer which could be forced to bend to the whims of the country’s Communist regime.
In 2018, the Shanghai-based technology company Wingtech bought a controlling stake in Nexperia, the latest in a series of acquisitions of Western chip firms by Chinese companies. While few hackles were raised about the deal at the time, it came as Beijing was outlining plans for self-sufficiency in microchips and as Donald Trump was stoking a technology trade war with China.
Since then, countries including Italy and South Korea have followed the US lead and blocked Chinese investment in domestic microchip companies.
Meanwhile, a global shortage of chips in the last nine months, pinned on disrupted ordering schedules during Covid and a series of one-off factory issues, have thrust manufacturing, even of the relatively low-tech variety, into the spotlight.
At this moment of intense pressure, even the Newport site’s relatively old-fashioned products have proved capable of sparking a row. The plant produces wafers, the building blocks of microchips onto which circuits are printed, and does not do so at the cutting edge. Its 200mm technology dates back to the 1990s; today’s most advanced chips are printed on more efficient 300mm wafers.
However, 200mm wafers are suddenly in demand again due to years of underinvestment and an increasing market for their use in power supply chips, which are becoming crucial in electric cars.
Since a £28m management buyout in 2017, revenue at Newport Wafer Fab had declined from £116.5m to £52.8m in 2019, under the threshold to trigger a national security investigation under current legislation. So in July, the deal was presented as the best of a bad situation. The company’s 450 staff would keep their jobs, and the Welsh Government would recoup a £13m loan used to finance the prior buyout.
However, its supporters appear to have misjudged the national mood.
Shortly before the sale was announced, Tory MP Tom Tugendhat, chairman of the Commons foreign affairs committee, challenged the Business Secretary, Kwasi Kwarteng, over why it was not being reviewed.
He replied saying the issue had been “considered thoroughly” and that the Government would continue to monitor the situation.
Newport Wafer Fab
Mr Kwarteng was himself overruled by Boris Johnson soon after the sale. The Prime Minister said he had ordered an investigation by Sir Stephen Lovegrove, the national security adviser.
“We will look at it again,” the Prime Minister told Mr Tugendhat in a parliamentary committee session.
Nexperia, suddenly faced with a battle it had not anticipated, went on the defensive. It accused Mr Tugendhat of “numerous inaccuracies” in claiming that the company was heavily-backed by the Chinese state and said that it had protected the factory from collapse.
The company has been meeting local politicians in recent weeks, offering pay rises to staff and pledging to hire more employees. In an open letter published in the South Wales Argus, general counsel Charles Smit said: “Under Nexperia’s leadership, Newport Wafer Fab will be a brilliant place to work for current and future generations to come.”
Ruth Jones, the MP for Newport West where the factory is based, has called for Sir Stephen’s review to be wrapped up quickly so that workers can be certain about their future.
Suspicions continue, however. Nexperia announced earlier this year it planned to team up with Wingtech on a major new plant near Shanghai, and around 30pc of the parent company’s shares can be traced back to the Chinese state, according to data company Datenna. Ciaran Martin, the UK’s former cybersecurity chief, called the situation a “level one” issue for the Government, above similar concerns such as the Chinese telecom company Huawei’s role in broadband infrastructure.
Sir Stephen is expected to wrap up his review in the coming weeks, with one source saying a decision could be expected this month. Whatever its conclusion, the Government may not be able to act on it until January, when new security legislation comes into force allowing it to retrospectively block small deals.
National Security and Investment Bill
It is this gap that Ron Black, the chip industry veteran leading a rival consortium, now hopes to exploit. Speaking to The Telegraph on Tuesday, Mr Black went public with a call for Nexperia to discuss a potential sale.
“There’s plenty of money around the table, if Nexperia wants to find an alternative out and receive their money back,” he said.
Mr Black is also hoping to present an economic case for his alternative, positioning the factory as a potential fulcrum of a cluster of companies in South Wales devoted to advanced “compound” semiconductors.
Mr Johnson is looking for ways to boost semiconductor production in Britain in addition to electric car manufacturing, which Newport Wafer Fab could supply. The Prime Minister may well be attracted to the option presented by “Taskforce Black”, as the project is believed to be called.
Mr Black suggests his consortium could invest up to £300m in the factory over the coming years, including the purchase price.
Nexperia will still have to decide if it is willing to come to the negotiating table. But the prospect of an alternative bid is only likely to increase pressure from those who would like to see Britain’s biggest microchip factory taken out of its hands.
“It’s clear that investors recognise the strategic value of Newport Wafer Fab,” Mr Tugendhat said. “I hope that the Government’s national security review comes to a similar conclusion.”