Nexperia, a Dutch firm owned by China’s Wingtech Technology, announced it had taken full control of Newport Wafer Fab (NWF), the UK’s largest producer of silicon chips. The value of the deal was not disclosed but has been estimated at £63m ($80.8m), according to CNBC. This price tag seems rather low, considering that in the same week Texas Instruments announced it will pay $900m for a vacant Micron fab in Utah.

Located in Newport, South Wales, privately held NWF’s chip plant was established in 1982 and it is one of just a handful of semiconductor fabricators in the UK. According to NWF, the deal will secure vital investment for the business.

NWF has several outstanding debts, including £20m ($25.7m), with HSBC and £18m ($23.1m), with the Welsh government, and these will be paid off following the sale. Drew Nelson, the CEO who became NWF’s majority shareholder after he acquired the business from Germany’s Infineon four years ago, will receive around £15m ($19.2m).

Nexperia already has manufacturing operations in Stockport (UK) and Hamburg (Germany). The company said that the deal would boost its analogue, power and mixed-signal capacity and help it to keep pace with global semiconductor demand. Nexperia is a customer of the foundry services offered by Newport Wafer Fab and became its second-largest shareholder in 2019. When NWF failed to meet certain conditions of its supply contract, Nexperia exercised the right to appoint its board of directors.

UK government does not see the NWF deal as a threat despite semiconductor shortages

NWF makes silicon chips that are used in power supply applications for the automotive industry, which has been hit particularly hard by the global chip shortage. It has a capacity of 35,000 wafers a month. The company has also been developing more advanced compound semiconductors, which are faster and more energy-efficient.

The deal with Nexperia raised significant economic and national security concerns, as it comes during a global chip shortage that has led various countries to seek ways of becoming more independent when it comes to semiconductor production. At present, the majority of chips are manufactured in Asia, with Taiwan’s TSMC, South Korea’s Samsung and China’s SMIC being the largest chip producers in the world.

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With tensions mounting between China and the world’s democracies, other countries are investigating Chinese tech takeovers before they are approved. In March 2021, the Italian government blocked Chinese firm Shenzhen Investment Holdings from acquiring a controlling stake in LPE, a Milan-headquartered semiconductor company, deeming it a sector of “strategic importance.” In June 2021, South Korea launched a review after Beijing-based Wise Road Capital agreed to buy semiconductor firm MagnaChip, deeming it a “national core technology.”

The UK government was urged to review the deal under the National Security and Investment Act, which was introduced in April 2021, as part of an effort to protect the nation’s technology companies from overseas takeovers when there is an economic risk or a security threat. However, the government did not consider it appropriate to intervene.