Boris Johnson trade adviser expects Chinese bid for UK semiconductor firm will be blocked

‘Unwise’ to give Beijing control over technological assets, warns former Australian PM

Andrew Woodcock
Political Editor
Tuesday 27 July 2021 19:23
Tony Abbott expects sale of Welsh semiconductor firm to China to be blocked

A senior trade adviser to Boris Johnson has said that he expects the sale of a Welsh semiconductor firm to a Chinese-owned company to be blocked, after the prime minister asked his national security adviser to review it.

Tony Abbott, who is also the former Australian prime minister, said that his country would not allow a deal like Nexperia’s £63m takeover of Newport Wafer Fab, and believed that the UK was now “obviously … moving in a comparable direction”.

In a speech to the Policy Exchange thinktank, Mr Abbott – who serves as an external adviser to Mr Johnson’s Board of Trade – said that western countries would be “most unwise” to sell technology businesses to China.

Every Chinese business is “subject to direction” from the Communist regime in Beijing which regards trade as “a strategic weapon to be turned on and off like a tap to reward friends and to punish foes” in a “new Cold War”, he warned.

He also said that western nations should each be conducting a national audit to determine which resources are essential to deliver a “reasonable life” and should be entrusted only to close allies to provide.

Asked by The Independent whether this meant that the Newport Wafer Fab deal should be blocked, he replied: “We have this thing called the Foreign Investment Review Board [in Australia], which has a pretty wide remit to examine all significant foreign investments from a national interest perspective.

“Pretty clearly, the sort of purchase that is currently contemplated here in Britain would not go ahead, were it happening in Australia.

“But I also think now that the PM’s national security adviser is looking at it here, obviously Britain is moving in a comparable direction.”

Nexperia’s bid for NWF will safeguard 400 jobs at the company’s factory in south Wales, but has raised concerns because the facility manufactures crucial power components for cars that have been in limited supply amid a global shortage of microchips.

Netherlands-based Nexperia is owned by Chinese electronics company Wingtech, whose shareholders are understood to include state-funded investors.

After initially refusing to intervene in the proposed sale, Mr Johnson told MPs on 7 July that he had asked national security adviser Sir Stephen Lovegrove to look at it again.

The PM told the Commons Liaison Committee: “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. I have asked the national security adviser to look at it.”

The former chief executive of the National Cyber Security Centre, Ciaran Martin, this week said that the purchase poses a greater threat to British interests than Huawei’s involvement in the 5G network.

Commons Foreign Affairs Committee chair Tom Tugendhat has previously warned that the UK was “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”.

Mr Abbott told Policy Exchange today that the economic rise of China had allowed half a billion of its inhabitants to join the middle classes and had provided a stream of cheap consumer goods for the rest of the world.

But he warned that circumstances had changed since his own government sealed a trade deal with China in 2014.

A newly aggressive China under Xi Jinping is asserting itself in what was likely to become “a new Cold War against a strategic competitor that’s far more formidable than the old Soviet Union because it’s been increasingly embedded inside the global economy and can bring economic as well as military pressure to bear against its targets,” he warned.

“Barring a change of dynasty in Beijing, China is likely to be the challenge of the century, with big implications for economics as well as for security.” Mr Abbott said that under President Xi, China was “absolutely set on becoming the world’s number one power”.

He also said that democratic countries must be “much more careful about becoming economically dependent on China, and about exchanges with China that have far more long-term value for them than for us”.

He added: “It would be most unwise, for instance, to sell technology businesses to Chinese interests – notwithstanding mutual goodwill between Chinese buyers and Western sellers – because in the end, every Chinese business is subject to the direction of the Beijing government in a way that no western country’s businesses are.

“Likewise university collaborations, at least in the hard sciences, however beneficial they might ultimately be for global knowledge and understanding probably shouldn’t be seen as too much of a one way street.”

Every business should be concerned to “minimise the critical place that Chinese intermediate goods might have in our supply chains, lest they be denied just when they’re needed most”, he warned.

And countries should conduct a national audit to decide “what’s needed to maintain a reasonable life in an emergency, what they need to be able to do for themselves or should stockpile, what they’re happy to trust close allies to provide and what they’re happy to obtain from the wider world because swift supply is not critical”, he said.

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