HONG KONG (CNN Business) — Two European chip deals have run into trouble over their links with China, a sign of concern spreading in the West over potential Chinese control of critical infrastructure.
Last week, the new owner of Britain’s biggest chipmaker was ordered to unwind its takeover, just days after another chip factory sale was blocked in Germany. Both transactions were hit by national security concerns, and had involved acquisitions by Chinese-owned companies.
In the United Kingdom, Nexperia, a Dutch subsidiary of Shanghai-listed semiconductor maker Wingtech, was told by the government to sell at least 86% of its stake in Newport Wafer Fab, more than a year after taking control of the factory. Staffers have since been protesting the decision, saying it puts nearly 600 jobs at risk.
In Germany, the economic ministry barred Elmos Semiconductor, an automotive chipmaker, from selling its factory in the city of Dortmund to Silex, a Swedish subsidiary of China’s Sai Microelectronics.
Chipmaking was already emerging as a new front in U.S.-China tensions. Now the two troubled deals illustrate how the pressure is also rising in Europe, particularly as Western officials face calls for key sectors to be kept out of Chinese control.
“These decisions mark a shift towards tougher stances regarding Chinese investment in critical industries in Europe,” said Xiaomeng Lu, director of geo technology at Eurasia Group.
“U.S. pressure definitely contributed to these decisions. A growing sense of technology sovereignty also likely prompted these moves — governments around the world are increasingly viewing the semiconductors industry as a strategic resource and seek to protect them from foreign takeovers.”
Legal experts said the two decisions were notable because each deal was initially thought to have been cleared.
The Newport Wafer case is “the first completed acquisition” that needs to be unwound under a UK national security and investment (NSI) act, which took full effect in January, according to Ian Giles, head of antitrust and competition for Europe, the Middle East and Asia for Norton Rose.
The company added that it had offered to avoid “activities of potential concern, and to provide the UK government with direct control and participation in the management of Newport,” a 28-acre site in south Wales.
The factory makes silicon wafers, the basis for making computer chips. Many of its products eventually power cars and medical equipment. Nexperia has indicated that workers at the facility now face an uncertain future.
In an open letter to the UK government last Thursday, the Nexperia Newport Staff Association said that it was “in disbelief” that employees’ livelihoods had been “put in jeopardy in the run-up to Christmas.”
“This is clearly a deeply political decision,” the group wrote, rejecting the idea that the deal would undermine British security. “You must see sense and protect our jobs by allowing Nexperia to keep their Newport factory.”
For Elmos, German authorities had initially indicated that they would issue a conditional approval, and even shared a draft approval after an intense review process lasting about 10 months, the company said in a statement following the injunction.
Tim Schaper, head of antitrust and competition for Germany at Norton Rose, said government intervention was also significant given that “Elmos’ technology is said to be quite old, state of the art in the 1990s, and allegedly not of great industrial importance.”
“The transaction became the plaything of a public debate about Chinese investors’ acquiring stakes in key German technologies,” he said.