China’s bid for Newport Wafer Fab condemned by MP Iain Duncan Smith

Former Work and Pensions Secretary Iain Duncan Smith gives a speech at the ‘Vote Leave’ campaign headquarters on May 10, 2016 in London, England.

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LONDON — A U.K. lawmaker believes China is using questionable methods to ensure it becomes a world leader in semiconductor technology.

Iain Duncan Smith, a member of parliament and the former leader of the Conservative Party, told the U.K. Parliament on Thursday that China has identified semiconductor technology as a key area it wants to dominate globally. The industry is currently led by Taiwan, South Korea and the U.S, which are home to chipmaking giants TSMC, Samsung and Intel respectively.  

China is “busy stealing technology, getting other people’s intellectual property rights, and buying up companies,” Duncan Smith said.

The Chinese government did not immediately reply to a CNBC request for comment. In the past, it has strongly denied allegations that it steals intellectual property.

In November 2018, China’s Ministry of Commerce spokesman Gao Feng reportedly said it’s hearsay that China steals IP from the U.S. One month later, the country’s Foreign Ministry said it was resolutely opposed to accusations from the U.S. and other allies criticizing China for economic espionage.

Earlier this year, China imposed sanctions on a number of British organizations and individuals, including Duncan Smith who is a vocal critic of China.

Crucial chipmakers

Chips are used to power everything from parking sensors in cars to sophisticated missile systems, but they’re currently in short supply and nations are taking steps to ensure they have enough of them.

On July 5, Chinese-owned Nexperia confirmed it intends to buy Newport Wafer Fab, the U.K.’s biggest chip manufacturer.

NWF, which employs around 450 people in the Welsh city of Newport, makes the wafers that electronic circuits are printed onto. While Nexperia is headquartered in the Netherlands, it is owned by Chinese-headquartered Wingtech Technologies.

Several other European chip firms — including Britain’s Imagination Technologies, France’s Linxens and the Netherland’s Ampleon — have been sold to state-backed Chinese firms in recent years, analysis shows.

The U.K. government initially said it has no plans to intervene in the Newport Wafer Fab acquisition, but last Wednesday Prime Minister Boris Johnson said the deal will be subject to a review by national security adviser Stephen Lovegrove.

“We have to judge whether the stuff that they are making is of real intellectual property value and interest to China, whether there are real security implications,” said Johnson.

While a review is set to be carried out, U.K. Business Minister Amanda Solloway reiterated on Thursday that the government does not plan to intervene at this stage as it’s not currently a national security concern.

“It is right that commercial transactions are primarily a matter for the parties involved,” she said. “The government has been in close contact with Newport Wafer Fab but it does not consider it appropriate to intervene in this case at the current time.”

Duncan Smith said he thinks the government is in an “unwholly mess” in relation to the deal.

“I wonder in the course of this failure to make a decision did they look at what China thinks of semiconductors?” he asked. “China is the busiest exporter in the world and is busy buying up semiconductor technology everywhere it can find it.”

National Security and Investment Bill

A new piece of legislation known as the National Security and Investment Bill was introduced in April and Duncan Smith believes the government should have used the law to block the Newport Wafer Fab acquisition.

“Are we now in the position of a kind of Project Kowtow, where we simply say, we just have to do business with the Chinese, no matter what?” he said.

In the last decade, Britain has sold off many of its most innovative firms to overseas buyers.

London artificial intelligence lab DeepMind, widely viewed as a world leader in AI, was sold to Google in the U.S. in 2014, while Cambridge-based chip designer Arm was sold to Japan’s SoftBank in 2016.

SoftBank is now in the process of selling Arm to California-headquartered Nvidia for $40 billion, although competition regulators around the world are probing the deal.