chip Photo:VCG

The UK on Wednesday took a U-turn by blocking a Chinese company's acquisition of an indebted semiconductor wafer factory there. Experts said the UK government's political intervention in a business deal casts a shadow on its economic engagement with China which won't benefit the British economy.

The UK Secretary of State issued a notice on Wednesday requiring Chinese electronics company Wingtech Technology Co's Netherlands-based subsidiary Nexperia to sell at least 86 percent of its shares in its semiconductor wafer factory in South Wales, known as Newport Wafer Fab (NWF), citing so-called national security risks related to "technology and know-how that could result from compound semiconductor activities at the site, and the potential for those activities to undermine UK capabilities."

The location of the site could facilitate access to technological expertise in the South Wales area and "prevent that area from being engaged in future projects relevant to national security", according to a statement on the website of the UK Department for Business, Energy & Industrial Strategy.

Wingtech Technology said on Thursday that NWF is mainly an original equipment manufacturer that makes power electronic devices with a mature manufacturing process. The incident would affect less than 1 percent of the company's profit and will produce a slight impact on company operations, it said in a filing with the Shanghai Stock Exchange.

The UK government's political intervention ruined a business deal that should have been win-win for companies from the two countries, Xiang Ligang, an independent technology analyst, told the Global Times on Thursday.

"There is almost no company from any other country, including the US and South Korea, which leads global semiconductor manufacturing, is willing or has the capital to acquire indebted NWF. It is the Chinese company that saved NWF from bankruptcy with the investment for equipment upgrading and offered a market," Xiang said.

He urged British politicians to correct their misunderstanding of China and Chinese companies. As Chinese companies attach increasing importance to international layouts, their investment in the UK is for customers in Europe rather than transferring technologies, if any in the wafer fab, back to China.

"We are genuinely shocked. The decision is wrong, and we will appeal to overturn this divestment order to protect the over 500 jobs at Newport. This decision sends a clear signal that the UK is closed for business. The UK is not leveling up but leveling down communities like South Wales," Toni Versluijs, UK country manager of Nexperia, was quoted as saying in a statement.

While creating further uncertainty for the company's employees in the UK, the move would affect the UK's semiconductor industry as well as the UK economy by taking out a strong player, according to Versluijs.

He said that the company hopes to address so-called national security issues openly, but noted that the UK government has refused to have a meaningful dialogue to discuss the company's proposals for a mutually acceptable solution.

Nexperia became the second-largest shareholder of NWF in 2019 and obtained 100 percent ownership of the facility in July 2021.

Li Guanjie, a research fellow from the Shanghai Academy of Global Governance and Area Studies, told the Global Times that rising protectionism and nationalism in the UK has deviated from its long-term pragmatic foreign policy by targeting Chinese firms, such as excluding Huawei from its 5G network.

If some British politicians continue to take an increasingly hardline toward China and even call for "economic decoupling" with China following the US, it would definitely deal a blow to China-UK relations and harm the UK's economic recovery, Li said. China is the third-largest trade partner of the UK, accounting for 6.9 percent of its trade.

"As the UK struggles to find export markets after Brexit, it would lead to an unimaginable result if the country gives up the vast Chinese market," Li said, urging British politicians to remain calm and independent, and drop their nationalistic mentality to ease economic tensions with China.