Two European chip deals have been stymied over ties to China, a sign of growing Western fears that China could take control of critical infrastructure.
Last week, the new owners of Britain’s largest chipmaker were ordered to call off the takeover, just days after Germany blocked the sale of another chip factory. Both deals have been hit by national security concerns and involved takeovers by Chinese companies.
In the UK, Nexperia, the Dutch subsidiary of Shanghai-listed semiconductor maker Wingtech Technology, was ordered by the government to sell at least 86% of its stake in Newport Wafer Fab after taking control of the factory for more than a year. Workers have been protesting the decision, saying it puts nearly 600 jobs at risk.
In Germany, the Ministry of Economy banned the sale of automotive chipmaker Elmos Semiconductor’s factory in Dortmund to Silex, the Swedish subsidiary of China’s Sai Microelectronics.
Chipmaking has emerged as a new front in U.S.-China tensions. Now the two troubled deals show that pressure is also growing in Europe, especially as Western officials face calls for key industries to be freed from Chinese control.
“These decisions signal a tougher attitude towards Chinese investment in key industries in Europe,” said Lu Xiaomeng, director of geotechnology at Eurasia Group.
“U.S. pressure certainly contributed to these decisions. [A] A growing sense of technological sovereignty may also drive these moves—governments around the world are increasingly [viewing the] The semiconductor industry serves as a strategic resource and seeks to protect them from foreign takeovers. ”
Legal experts said both decisions were notable because each deal was initially thought to have been approved.
The Newport Wafer case is the “first completed acquisition” under the UK’s National Security and Investment (NSI) Act, which came into full force in January, said Ian Giles, European antitrust and competition chief, Norton. Roche’s East and Asia.
Nexperia said last week that it was “shocked” by the decision and that “the UK government has chosen not to engage in meaningful dialogue with Nexperia, or even visit the Newport site.”
The company added that it had offered to avoid “activities of potential concern and to give the UK Government direct control and involvement in the management of Newport”, a 28-acre site in South Wales.
The factory produces silicon wafers, which are the basis for making computer chips. Many of its products end up powering cars and medical equipment. Workers at the plant now face an uncertain future, Nexperia said.
in a open the envelope The Nexperia Newport staff association told the UK government last Thursday that it was “unbelievable” that the livelihoods of staff were “at risk on Christmas Eve”.
“This is clearly a deeply political decision,” the group wrote, rejecting the notion that the deal would undermine UK security. “You have to understand and protect our jobs by allowing Nexperia to keep its Newport factory.”
For Elmos, German authorities initially said they would issue conditional approval and even shared a draft approval after an intense review process that lasted about 10 months, the company said in a statement after the ban.
Tim Schaper, Norton Rose’s head of antitrust and competition in Germany, said government intervention was also important because “the technology at Elmos is said to be quite old, state-of-the-art in the 1990s, allegedly in the It doesn’t matter industrially.”
“The deal became a plaything in the public debate about Chinese investors taking stakes in key German technologies,” he said.
Alexander Rinne, head of the European antitrust practice at Munich-based international law firm Milbank, said regulators may be concerned about know-how leaks.
“Elmos is known for making chips for the automotive industry, which is a core industry in Germany and a source of pride for Germany,” he said in an interview.
Both Elmos and Nexperia declined interview requests. A Nexperia spokesperson told CNN Business on Tuesday that it is “considering its options for the UK government’s decision.”
Chips are a source of growing tension between the U.S. and China. Washington has declared material shortages a national security concern and emphasized the importance of remaining competitive in advanced technological capabilities.
This year, the U.S. has tightened its own restrictions and urged allies to enact their own, Lu said. In August, the U.S. government ordered two top chipmakers, Nvidia (NVDA) and AMD (AMD), to stop exporting certain high-performance chips to China.
Two months later, the Biden administration announced comprehensive export control measures, prohibiting Chinese companies from purchasing advanced chips and chip manufacturing equipment without a license. The rules also limit the ability of U.S. citizens or U.S. green card holders to provide support for chip development or production at certain manufacturing plants in China.
The pressure is mounting. On Monday, NATO Secretary-General Jens Stoltenberg urged the West to be “careful not to create a new dependence on China”. Speaking at the NATO parliamentary assembly in Madrid, Stoltenberg said he was seeing “increasing efforts by China” to control critical infrastructure, supply chains and key industrial sectors in the West.
“We cannot give authoritarian regimes any chance to exploit our weaknesses and undermine us,” he said.
China has delayed the handling of two European semiconductor cases.
“We firmly oppose the British side’s move and call on the British side to respect the legitimate rights and interests of Chinese companies and provide a fair, just and non-discriminatory business environment,” Chinese Foreign Ministry spokesman Mao Ning told the media. Briefing last Friday when asked about the Newport Wafer order. “The UK has exaggerated the concept of national security and abused state power.”
Another Chinese foreign ministry spokesman, Zhao Lijian, called on Germany and other countries to “not politicize normal economic and trade cooperation” at a news conference earlier this month, without targeting Elmos specifically.
Germany has imposed stricter scrutiny on Chinese buyers this year. A similar controversy erupted last month when Chinese state-owned shipping giant COSCO Group bid for a stake in the terminal operator at the Port of Hamburg. The size of the investment was later capped under pressure from some members of the government.
If the chipmakers appeal, they could face an uncertain battle that could last years, lawyers said.
In each case, they would need to challenge it in court within about a month of the regulator’s decision, unless there are exceptional circumstances, according to Norton Rose.
Both Britain and Germany have recently added rules to expand government oversight of such decisions, making outcomes less predictable. In Germany, changes to foreign direct investment rules in 2020 mean the government can intervene in future deals “if ‘public order and security are likely to be compromised,'” Schaper said.
By contrast, previously it could only impose restrictions “if there was a ‘real, sufficiently serious threat to public order and security,'” he told CNN Business.
In the UK, the government’s ability to review deals retrospectively under the NSI Act “was really seen as something surprising and far-reaching,” said Andrea Hamilton, a London-based partner at Milbank.
“If challenged, as Nexperia apparently intends, it will also be about [the] The scope of the NSI Act limits,” she said.
Elsewhere, attention is shifting to the Netherlands. Lu of Eurasia Group said that the Dutch government is currently facing pressure from the United States to restrict exports to China, especially from ASML, a semiconductor equipment manufacturer that dominates the lithography machine market.
“This is going to be the next case study,” she told CNN Business.
The Netherlands has made it clear that it will form its own position.
When asked about the issue this month, Dutch Foreign Trade Minister Liesje Schreinemacher said the country “will not copy US export restrictions to China one-for-one”.
“We make our own assessment,” she said in an interview with Dutch newspaper NRC.
— CNN’s Zahid Mahmood, Rose Roobeek-Coppack and Laura He contributed to this report.