The previous owner of the UK’s largest semiconductor manufacturer is orchestrating a bid to buy back the company he sold to Chinese-owned Nexperia in a deal that is at the centre of controversy over Britain’s industrial policy.
Drew Nelson owned Newport Wafer Fab until 2021 and oversaw its reported £63mn sale to Dutch company Nexperia, owned by China’s Wingtech Technology. He has teamed up with private equity group Palladian Investment Partners to bid for the company, according to two people briefed on the matter.
It comes as the UK government plans to call for Nexperia to reduce its ownership of the company substantially, according to two people briefed on the matter. Nexperia held a 14 per cent stake before the buyout. The government has told the company it will decide by October 3.
The former business secretary, Kwasi Kwarteng, announced in May that he was “calling in” the acquisition of Newport under the National Security and Investment Act, new legislation that enables the government to limit or block foreign transactions involving strategic national assets.
Under the terms of the takeover, Nelson was offered first refusal to buy back the company, which employs about 450 people in the Welsh city of Newport if its assets were made available again, the people said.
Semiconductors, which range from small advanced chips to larger and less advanced silicon used in household appliances and cars, have become some of the most sought after and geopolitically divisive resources in the world.
Western governments are seeking to bolster their domestic supplies of the technologies as tensions between China and the US increase. In July, the US passed the Chips and Science Act that earmarked $52bn in grants to support advanced chipmaking. The EU has its own proposal for a €43bn Chips Act, and France has announced it will separately invest billions in a new semiconductor plant being built by STMicroelectronics and US group GlobalFoundries.
Nexperia, which became Newport Wafer Fab’s second-biggest shareholder in 2019, launched a takeover of the chipmaker in 2021, when the Welsh company was struggling to pay its debts and faced potential bankruptcy. The plant has since sold its wares exclusively to Nexperia, stoking fears of tech transfer from the UK to China.
Nelson, who was also co-founder and chief executive of Welsh wafer supplier IQE until the end of last year, incorporated a new company called Newport Wafer Fab 10 in July of last year, Companies House records show.
Ron Black, former chief executive of UK semiconductor processor licensing company Imagination Technologies, has also been vocal about his interest in acquiring the company, saying his consortium had amassed more than £300mn from various parties. “These assets are very dangerous to leave in unstable conditions,” he said, referring to concerns about an exodus of staff because of uncertainty about the company’s future.
If the government continued to delay its decision about whether the Nexperia sale could go ahead, it might have a Pyrrhic victory, he added. “It can stop a takeover on well-founded national or economic security grounds, but end up losing all of the critical staff.”
Neither Nelson nor Palladian responded to requests for comment.
When Boris Johnson was prime minister the government reversed plans to allow Chinese telecoms equipment maker Huawei to supply kit for Britain’s 5G phone networks. Johnson also intervened to block an investor linked to Beijing from taking control of the board of Imagination Technologies.