The Chinese owner of a Dutch chip firm that wants to buy the U.K.’s largest chip plant is heavily backed by the Chinese Communist Party, according to analysis from Chinese investment screening specialists Datenna.
China’s Wingtech Technology — the owner of the Netherlands-based Nexperia, which is set to acquire Newport Wafer Fab for £63 million ($87 million) — is under significant state influence through its many layers of shareholders, according to Datenna, which carries out research on Chinese investments and acquisitions for governments.
The layers lead to the State-owned Assets Supervision and Administration Commission of the State Council, which is a special commission of the People’s Republic of China, as well as specific government-run semiconductor investment funds.
Almost 30% of Wingtech’s shares can be traced back to the Chinese government, Datenna found, which shared the data exclusively with CNBC.
Significant Wingtech shareholders with links to the Chinese government include Wuxi Guolian Industrial Investment Co. Ltd and Kunming Industrial Development Equity Investment Fund Partnership, who hold 9.76% and 5.67% of Wingtech’s shares respectively.
Datenna analysis of Wingtech’s 10 largest shareholders.
Datenna analysis of Wingtech’s 10 largest shareholders.
Datenna
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. However, in the last few years, the company has become increasingly interested in semiconductors.
With around 20,000 staff and a market value of roughly $18 billion, it is one of many companies in China to be backed by the Chinese government.
Concerns about selling vital assets
Located on a 28 acre site in South Wales, U.K., NWF employs around 400 people and produces around 8,000 wafers a week. The wafers are thin pieces of silicon that circuit patterns are printed on to build chips. NWF’s 200mm wafers are largely used in the automotive industry, which has been hit particularly hard by the chip shortage.
Some U.K. lawmakers are concerned that the deal will see a rare U.K. advanced chip manufacturing plant handed to China. As the global chip shortage rages on, these factories are widely considered to be strategically important assets to countries. Semiconductors are small pieces of silicon, a crucial technology which are used to power everything from cars and planes to computers and missiles.
Tom Tugendhat, leader of the U.K. government’s China Research Group and chairman of the Foreign Affairs Select Committee, told CNBC on Monday that he’s very surprised the purchase is not being reviewed under the National Security and Investment Act, which was introduced in April.
“Having been in touch with partners in the U.S. and around the world, I know I am not alone,” he said.
“The semiconductor industry sector falls under the scope of the legislation, the very purpose of which is to protect the nation’s technology companies from foreign takeovers when there is a material risk to economic and national security,” he said.
“When the U.K. signed the Carbis Bay G7 communique, we pledged to take 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 pointed out that the government is “yet to explain why we are turning a blind eye to Britain’s largest semiconductor foundry falling into the hands of an entity from a country that has a track record of using technology to create geopolitical leverage.”
A U.K. government spokesperson told CNBC on Monday that it doesn’t consider it appropriate to intervene at this time.
“We will continue to monitor the situation closely and will not hesitate to use our powers under the Enterprise Act should the situation change,” the spokesperson said. The Enterprise Act was introduced in the U.K. in 2002 and it made significant changes to the country’s competition law with respect to mergers.
“We remain committed to the semi-conductor sector, and the vital role it plays in the U.K.’s economy,” they added.
Wider trend
Datenna, which is also based in the Netherlands, believes China is lagging behind other countries on semiconductor technology but it’s trying to stimulate the sector through foreign acquisitions and government-run investment funds.
The Chinese government has been snapping up stakes in an increasing number of European semiconductor firms over the last decade through its state-backed companies, according to Datenna, which has built an interactive map as part of an effort to provide greater transparency on Chinese investments in Europe.
Beijing-headquartered Canyon Bridge acquired semiconductor and software design company Imagination Technologies in 2017 for £550 million ($763 million) after Apple said it was going to stop using the company’s technology in its products.
Elsewhere, Chinese state-backed semiconductor firm Tsinghua Unigroup acquired French chipmaker Linxens for $2.6 billion in 2018, and Jianguang Asset Management acquired Dutch chipmaker Ampleon in 2015 for around 1.7 billion euros ($2 billion).
In all of these cases, it’s easy to see China exerting its influence, according to Datenna.
In the case of Nexperia, for example, the relatively young CEO, Frans Scheper, took early retirement and was replaced by Wingtech Chair Xuezheng Zhang at the beginning of 2020. Xuezheng Zhang’s appointment came after Wingtech acquired 79.98% of Nexperia’s shares at the end of 2019. Wingtech has since acquired the remaining shares.
Meanwhile, in September 2019, Linxens announced the construction of a massive factory and research center in Tianjin, China. The factory is expected to be completed in 2021 and requires an investment of about 2.1 billion Chinese yuan ($325 million). Elsewhere, Ampleon has pivoted to focus on the aerospace and defense sector since it was acquired.
Semiconductors are key to China’s industrial policy and they’re considered a crucial sector and a technology where the country wants to achieve hierarchy. China has the biggest semiconductor market in the world but only 16% of the semiconductors it uses are produced within the country itself. Under the “Made in China 2025” plan, the nation’s leaders hope the share will rise to 70% by 2025.
Like other countries, China also wants to become more self-reliant on chip production instead of depending on chips from the likes of South Korea, where Samsung is based, and Taiwan, where TSMC is based.
“We see a correlation between the strategy of the Chinese government to increase China’s self-sufficiency in the semiconductor industry and the level of state-influence in the acquisitions in the semiconductor industry,” said Datenna CEO Jaap van Etten.
