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Newport Wafer Fab

Volume 816: debated on Monday 6 December 2021


Asked by

To ask Her Majesty’s Government what assessment they have made of the strategic importance to the United Kingdom of Newport Wafer Fab prior to its takeover by a Chinese-owned company.

My Lords, we welcome trade and investment where it supports UK growth and jobs and meets our legal and regulatory requirements while not compromising national security. Where we believe there are concerns, we raise them, and where we need to intervene, we will. As the Prime Minister said at the Liaison Committee in July 2021, the National Security Adviser is reviewing this takeover and it would therefore be inappropriate to comment until his review has concluded.

I thank the Minister for that reply, and I understand that he cannot say a great deal more about the review. Nevertheless, can he say something about the clarity of the Chinese Communist Party’s position in comparison with that of the UK, in that it has a clear strategy of undermining resilience and security; promoting dependency; acquiring intellectual property and data; and destroying competitiveness through slave labour in everything from green energy through to surveillance equipment made in places like Xinjiang, which the Foreign Secretary has called a slave state practising genocide? In letting it acquire the UK’s largest-selling silicon chip factory, what account has been taken of these things; the National Security and Investment Act, which will come into effect in January; the integrated review; and the Competition and Mergers Authority’s position?

I totally share the noble Lord’s concerns about the actions of the Chinese Communist Party in Xinjiang, Tibet and various other areas where they commit appalling human rights abuses. However, as he will be aware, I cannot comment further on this particular takeover. The National Security Adviser is reviewing it and he will do so on national security grounds.

On Chinese takeovers, does my noble friend share the concerns of a great many of us regarding the way that the Chinese are extending their influence—buying their influence—and taking over the Commonwealth, be it in Barbados, Sri Lanka or sub-Saharan Africa? There have been newspaper reports about this. It is a deliberate thing. They are trying to supplant British or western influence and plant their influence in the Commonwealth and elsewhere.

I share the concerns of my noble friend. This Question is getting more into foreign affairs than it is into business affairs, but I understand what he is saying. I have seen the reports and I share his concern.

My Lords, I am disappointed by the response from the Minister. The Chinese have made a huge effort to gain intellectual property over a number of years. I had to go and warn them about this way back at the end of the 90s—they paid no attention then and they are doing it now, more and more. Here is a company with a large chunk of intellectual property, working in the area of chips—something the Chinese are not good at because the Americans have now stopped giving them to them, as they were in the past—and it seems as though we are not really focusing on this. Do we have a real strategy for constraining China’s aims in this area? It is extremely worrying.

Nexperia is not new to this particular company; it already owned 15% of it before the latest takeover. As I said, I cannot comment any further on that particular transaction, but we will look carefully at all the facts of the case. Our powers are being strengthened with the National Security and Investment Act coming into force on 4 January next year. We have retrospective powers under that Act and we will not hesitate to act if we need to.

My Lords, hardly a week goes by without the semiconductor shortage impacting some of our businesses in this country. It is not just about security; it is about manufacturing. Meanwhile, there is an investigation into Newport Wafer Fab and a separate one going on into Arm. Would it not make more sense if there was a holistic view of the semiconductor business in this country and a task force put together, so that we can secure indigenous supplies of these absolutely vital components?

The noble Lord is of course aware that we have announced action in both of those cases: both the instances he mentioned are currently being reviewed. As I said, if we need to take action, we will. On his broader question about semiconductors, we already offer a lot of support to industry through the research councils and the catapults and will continue to do so. It is an area that the Government are acutely aware of.

My Lords, this is part of much wider picture, of course. Can the Minister assure the House that, in their forthcoming national resilience strategy, the Government will deal with such industrial issues in a sufficiently agile way that will be able to cope with a rapidly evolving corporate and technological landscape?

The noble and gallant Lord makes a good point, which is why we have strengthened our powers under the National Security and Investment Act, recently passed in this House. We look forward to implementing that legislation on 4 January. It will require notifications in 17 key areas of the economy. On top of that, the Secretary of State has additional call-in powers.

My Lords, does the Minister agree that it would be a disaster if the last remaining large semi-fab business fell permanently into the hands of the Chinese?

As I said in response to an earlier question, Nexperia, the company concerned, already had 15% of this company anyway, and already owns other semiconductor manufacturing plants in the UK. The noble Lord can read its statement as to what it intends to pursue for this business, if he wishes to do so.

My Lords, the noble Lord, Lord Campbell-Savours, wishes to speak virtually. I think this is a convenient point for me to call him.

Is not the real issue whether Newport Wafer Fab, now employing around 450, would have survived without positive Chinese intervention offering long-term viability? If there is real concern over the survival of UK strategic hi-tech, why not revisit lessons learned in the 1970s from Labour’s NEB, the Conservatives’ NEDC and BTG, and the role that Inmos played in the early development of chips? Without a national initiative, we are conceding all to Taiwan, Japan, Korea and China, and a whinging United States of America, and losing markets.

Of course, I cannot comment further on these transactions, as the noble Lord knows, but semiconductors are an important aspect of our industrial future. We have some excellent manufacturing companies in the UK, and we want that to continue.

My Lords, one of the stated objectives of a project awarded by Innovate UK to Newport Wafer Fab is to provide the UK with a novel sovereign gallium nitride capability. Can my noble friend tell the House how that capability can possibly remain novel, or indeed sovereign, following acquisition by a foreign state-backed entity?

The noble Lord tempts me but I cannot go any further than I have already stated. This takeover is being reviewed by the National Security Adviser, and we hope to reach a decision shortly.

My Lords, while there can be no doubting the strategic importance to our national security of the part played by Newport Wafer Fab, can the Minister explain why the Government did not intervene in a takeover earlier this year? Could he tell the House what tools the National Security Adviser will have at his disposal that could be applied when the ongoing review is completed?

I am not sure to which takeover the noble Lord refers that we did not intervene in—perhaps we should have a separate conversation about that. But it is clear that the Government as a whole have substantial power. As I said, the new NSI Act comes in on 4 January, when it will be commenced, but we have retrospective powers that can go back to November 2020 under that Act.

My Lords, I go back to the question asked by the noble Lord, Lord Fox, about a strategic overview. How many other firms in the semiconductor supply chain are foreign owned?

I do not have that information to hand. It would depend on what firms the noble Lord refers to and what form of suppliers they were. There are many hundreds of companies that serve some of these large manufacturing plants. As I said in response to an earlier question, we understand the importance of semiconductor manufacturers. We support this by the Engineering and Physical Sciences Research Council and we support the commercialisation of projects under the Compound Catapult, and we will continue to do so.

My Lords, the suspicion locally is that the security part of the review is over, and the hunt is on to buy up shares for Nexperia to create a Chinese-UK company. Given the importance of this to electric vehicle manufacturing, of which there is a massive need at present, and to jobs to be created locally, does the Minister agree that this should be the Government’s prime initiative, and that we need a speedy solution so that investment can take place?

I know the concerns locally about the investment. I have spoken to Newport’s MP about this, and she expressed her views on the takeover. As I have said, we have taken all those factors into consideration, particularly that of national security, which the National Security Adviser is currently considering this takeover on, and we will reach a decision on that shortly.