Newport Wafer Fab Sale

(Urgent Question): To ask the Secretary of State for Business, Energy and Industrial Strategy if he will make a statement on the sale of the Newport Wafer Fab semiconductors plant in Duffryn, Newport, to the Chinese-owned firm Nexperia.

Thank you very much for granting this urgent question, Mr Speaker. I thank the Minister also for being present to answer it. I understand that the Government cannot comment on security matters, but the purpose of the urgent question is to give Parliament an opportunity to make its views known about the strategic importance of the Chinese takeover of Wafer Fab, a semiconductor manufacturer based in Newport.

The Chinese firm Wingtech Technology has a controlling stake in the acquiring company Nexperia, which supplies Chinese companies that create smartphones, including Huawei. The Prime Minister stated at the Liaison Committee last week on 7 July:

“This Government is spending a huge quantity of taxpayers’ money to make sure that we get Huawei out of our telecommunications networks.”

Would it not therefore be completely inconsistent if Government policy allowed the takeover of a firm creating microchips of such importance to our national security? The Prime Minister also stated that we need to be more self-reliant, and that he was told that it costs £9 billion to build a semiconductor factory. Why would we allow such sophisticated national infrastructure to be sold?

Finally, while I agree with the Prime Minister that we do not want an

“anti-China spirit to lead to our trying to pitchfork away every investment from China into this country”,

in this particular case the security issues should be paramount. China considers this matter vital for its national security, as do other countries, including our ally the United States. Why are our Government not taking the same view?

We have gone slightly out of order. The hon. Member was meant to just ask the urgent question, and then come back. If the Minister can roll the two together, I will then go to the shadow Minister.

Of course, Mr Speaker. The Government recognise Newport Wafer Fab’s value as a company, and its contribution to consortia based at the south Wales compound semiconductor cluster. The Government are committed to the semiconductor cluster and the vital role that it plays in the UK’s economy. The Welsh Government have previously provided financial support to the company, as economic development is devolved and the responsibility of the Welsh Government.

Under the Enterprise Act 2002, the Government have powers to intervene in mergers and takeovers that raise national security concerns. We have recently strengthened those powers in the National Security and Investment Act 2021, which is expected to come into force at the end of this year, but it is right that commercial transactions are primarily a matter for the parties involved. The Government have been in close contact with Newport Wafer Fab, but do not consider it appropriate to intervene in this case at the current time.

We will continue to monitor the situation closely, and, as part of that, the Prime Minister has asked the national security adviser to review this case. Separately, work is under way to review the wider semiconductor landscape in the United Kingdom. As I am sure the House will appreciate, I am unable to comment on the detail of commercial transactions, or of any national security assessment of a particular case.

I congratulate the hon. Member for The Cotswolds (Sir Geoffrey Clifton-Brown) on securing the urgent question.

Newport Wafer Fab is a symbol of British innovation and world-class employment—not just its 450 employees but the wider regional semiconductor cluster. It is also a testament to the long-term role of public investment in strategic economic planning by the Welsh Government, so the priority must be to secure a viable long-term future for what is the UK’s largest semiconductor manufacturer. With European automotives protesting over chips shortages and promising to ramp up domestic production, it is clear that Newport Wafer Fab is a strategic economic asset.

Labour welcomes investment in the business, as we welcome almost all inward investment in thriving British industries, but, given the importance of semiconductors to our country’s critical infrastructure, there is a clear case for examining this on national security grounds, and it is a pity that the Minister did not make it. Global competition to secure microchip development is accelerating. Our national security interests require a strong position in this contested market, so how will the Minister now ensure that this vital national economic and technology asset is protected? Will she use the powers in the National Security and Investment Act 2021 to urgently scrutinise this takeover? If the sale is blocked on national security grounds, will the Government work creatively and urgently to secure the financing that the business needs? All options must be kept on the table, including a role for potential public equity investment.

As Labour argued during the passage of the NSI Act, the Government have consistently outsourced British national security and economic interests, because Ministers have prioritised market zeal over British security, as in 2012 when they let the Centre for Integrated Photonics, a prize British research and development centre, be taken over by Huawei. That is why Labour is calling for the national security and public interest test regime to be strengthened. This is a critical test of whether the Government are willing to use these new powers or not, which goes to the heart of what kind of industrial strategy we have and what kind of country we want to be.

As laid out in the integrated review, China is a systemic competitor. The scale and reach of China’s economy, the size of its population, its technological advancement and increasing ambition to project its influence on the global stage, for example through the belt and road initiative, will have profound implications worldwide. Open, trading economies such as the UK will need to engage with China and remain open to Chinese trade and investment, but they must protect themselves against practices that have an adverse effect on prosperity and security. Co-operation with China is vital in tackling transnational-type challenges, particularly climate change and biodiversity loss.

The UK wants a mature, positive relationship with China, based on mutual respect and trust. There is considerable scope for constructive engagement and co-operation, but as we strive for that positive relationship, we will not sacrifice either our values or our security. It has always been the case that where we have concerns, we will raise them, and where we need to intervene, we will. The Government have a range of legislative and regulatory powers to protect infrastructure and critical services, including the new National Security and Investment Act 2021. The NSI Act is nation-agnostic: acquisitions should be considered on a case-by-case basis, which will help to ensure that the Act is not discriminatory and that we uphold our World Trade Organisation obligations.

I pay tribute to my hon. Friend the Member for The Cotswolds (Sir Geoffrey Clifton-Brown) for the timing of his urgent question—which is clearly rather better than my timing. May I ask the Minister—who is very kindly in her place—about the National Security and Investment Act 2021? The Act set forth various conditions for securing various elements of British industry, but as set out, that was all to be done by central Government, not by devolved Administrations. Clearly this is one of those moments, because there is a global semiconductor chip shortage, delaying the production of white goods, cars and, indeed, military equipment.

I am told that Newport Wafer Fab is a key partner for the development of—I am afraid I will have to use the technical terms, because I am not qualified to translate them—RF MMIC high-frequency GaN designs for defence 5G radar systems. This is a £5.4 million project led by the Compound Semiconductor Applications Catapult and Cardiff University, with Newport Wafer Fab providing process development expertise and a route to scale up within a proposed expansion of Newport Wafer Fab 10.

If that does not put Newport Wafer Fab into the national security bracket, I do not know what does. The idea that this is a matter for the Assembly or the Government in Wales is, I am afraid, simply not the case. The Prime Minister seems to have pre-empted that, as he has asked the National Security Adviser, as he told the Liaison Committee the other day, to have a look into this. Will the Minister now commit, on behalf of her Department, to present the National Security Adviser’s report to Parliament, to allow us to hear the evaluation of Her Majesty’s Government and to debate it?

I acknowledge the work that my hon. Friend does, which is greatly appreciated. As he will know, the Act focuses on acquisitions of control over qualifying and entitled assets. That means that once the Act is commenced we will be able to scrutinise and, if necessary, intervene in takeover companies and in the purchase of individual assets, such as intellectual property. The Government are absolutely clear that where concerns are raised we will intervene. However, my hon. Friend and the House will appreciate that I cannot go into any detail or comment on commercial transactions or national security assessments.

Seventy-seven days have passed since the National Security and Investment Act received Royal Assent. In the previous months, I and colleagues across the Chamber sought to work constructively with the Government to ensure that that legislation was as robust as it possibly could be. Notwithstanding the fact that the Government rejected most of our suggestions, we all backed the Act because it was in our collective interest to do so, yet it appears to have been rendered almost useless at its first hurdle. I respectfully suggest that had it not been for the intervention of the Chair of the Select Committee on Foreign Affairs, it is doubtful that the Prime Minister would have sought national security advice on this matter. Why did it take an intervention from a senior Government Back Bencher for the Government to take this matter seriously? Is the National Security and Investment Act as it stands simply not up to the task? Is it not worth the paper it is written on?

The Government have looked closely at the transaction and do not consider it appropriate to intervene at the current time. However, as the Prime Minister made clear at the Liaison Committee last week, he has asked the National Security Adviser to review this.

The pandemic has shown us the importance of supply chains and of the ability to produce the materials we need here in the UK. We also know that semiconductors are a vital component of many of the day-to-day items that we use and take for granted. A disruption to the supply chain of semiconductors will have far-reaching consequences. Will my hon. Friend set out what steps the Government are taking to strengthen their powers in relation to the threat of hostile investment?

In 2020, the Government amended the Enterprise Act 2002 so that we could intervene in mergers and takeovers that threaten our ability to combat a public health emergency such as coronavirus. As the House will know, we have recently overhauled our investment screening system through the new National Security and Investment Act so that we can intervene in takeovers of companies or purchases of assets that pose a risk to national security. The NSI Act will allow the Government to scrutinise and intervene in acquisitions that may pose national security risks. It also provides businesses and investors with predictable, legally defined timelines and processes for decisions on acquisitions. The Act requires particularly sensitive acquisitions to be approved by Government before they are completed, but the vast majority of acquisitions will be unaffected by these powers.

I am grateful to the hon. Member for The Cotswolds (Sir Geoffrey Clifton-Brown) for this morning’s urgent question and for speaking to me about it last night. Newport Wafer Fab is in my constituency and I have in recent days had a number of meetings about the issue, and have spoken to many people across Newport West who are watching events very closely. Newport Wafer Fab is part of the unique semiconductor cluster in Newport West—the only one in the world, and I am so proud. It employs more than 450 people who are highly skilled, well paid and need job security. I fully understand the need for scrutiny of any deal involving potentially hostile foreign takeovers and national security is of course paramount, but my constituents and I want to see an open, transparent and fair deal. Will the Minister meet me at the earliest possible opportunity so that we can ensure that whatever happens next, those jobs, the impact on the people of Newport West and the strategic nature of this plant will be kept in mind every step of the way?

The hon. Lady makes an important point. The Government have looked closely at the transaction and do not consider it inappropriate, but as the Prime Minister has made clear, the National Security Adviser will review it. I am happy to meet the hon. Lady or at least facilitate a meeting with the appropriate Minister.

My hon. Friend talks about mutual respect between ourselves and the Chinese people, which I believe is correct, but the Chinese Government do not respect rules-based order, particularly in enterprise and commerce. This semiconductor plant is critical to our UK economy, particularly at a time of rising demand for semiconductors, and the 450 jobs at Duffryn are also very important. Does she agree that the protection of those jobs, that plant and the UK-owned intellectual property is critically important to her and to this Government?

Like my hon. Friend, I am of course totally committed to skills, as are the Government. In fact, the Government have invested £800 million in compound semiconductor research. In 2018, through UK Research and Innovation, we established a compound semiconductor applications catapult with £50 million of funding to collaborate with large companies and start-ups to develop and commercialise new applications utilising this technology. To date, the catapult has initiated projects worth more than £100 million. The UK has over 100 companies actively working with compound semiconductors. About 5,000 UK companies, 90% of which are small and medium-sized enterprises, are designing and making electronic components, devices, systems and products. The catapult is a national body dedicated to compound development across the United Kingdom. The UK Government, via UKRI and the Welsh Government, have additionally provided significant funds to help to establish south Wales university structures such as the Institute for Compound Semiconductors.

This is a very important question. A few years ago, I fought the takeover of Syngenta in my constituency—one of the top world leaders in plant protection, fertiliser and all that complicated research stuff. It was taken over quickly by the Chinese—not by the Chinese, but by the Chinese Communist Government. There is nothing on the stock exchange; it is owned by the Chinese Government. Most people in this country do not realise just how widespread this insidious Chinese takeover of so many strategic assets in our country is. Will the Minister ask her bosses to have an audit of how far this takeover of British companies has now gone? As most people know, the whole of the electricity transmission in London and the south, with 10 million customers, is owned by the Chinese—or, again, the Chinese Government. How far can this go before we wake up to what is really going on? It is insidious, it is dangerous, and it is a real threat to our national security.