Two European chip deals have run into trouble over their ties to China, a sign of growing concern in the West over potential Chinese control over critical infrastructure.
Britain’s biggest chipmaker had a new owner last week. Ordered to end its occupation.just one day later The sale of the chip factory was halted. in Germany. Both transactions were affected by national security concerns, and involved acquisitions of Chinese-owned companies.
In Britain, Nexeria, a Dutch subsidiary of Shanghai-listed semiconductor maker Wingtech, was asked by the government to sell at least 86 percent of its stake in the Newport wafer fab, a year after it took control of the factory. Staff have been protesting the decision ever since, saying around 600 jobs are at risk.
In Germany, the economy ministry blocked automotive chipmaker Elmos Semiconductor from selling its factory in the city of Dortmund to Silex, the Swedish subsidiary of China’s Sai Microelectronics.
Chipmaking was already emerging as a new frontier in US-China tensions. Now two troubling deals illustrate how pressure is mounting in Europe as well, especially as Western officials face demands to keep key sectors out of Chinese control.
“These decisions mark a shift towards a tougher stance on Chinese investment in key industries in Europe,” said Xiaoming Lu, director of geotechnology at Eurasia Group.
“US pressure certainly contributed to these decisions. [A] A growing sense of technology’s autonomy also likely fueled these initiatives—governments around the world are increasingly expanding. [viewing the] Semiconductors industry as a strategic resource and tries to protect them from foreign takeover.
Legal experts said both decisions were notable because each deal was initially cleared.
The Newport Wafer case is the “first full acquisition” required to be de-injured under the UK. National Security and Investment (NSI) Actwhich took full effect in January, according to Ian Giles, head of antitrust and competition for Europe, Middle East and Asia for Norton Rose.
Nexeria said Last week it said it was “shocked” by the decision, and that “the UK government chose not to engage in meaningful discussions with Nexaria or visit the Newport site.”
The company added that it has “offered to avoid activities of potential concern, and to provide the UK government with direct control and participation in the management of Newport”, which covers 28 acres in South Wales.
The factory makes silicon wafers, the basis for making computer chips. Many of its products eventually power cars and medical devices. Nexaria has indicated that workers at the facility now face an uncertain future.
In one An open letter To the UK government last Thursday, the Nexperia Newport Staff Association said it was “unbelievable” that employees’ livelihoods were “put at risk over Christmas.”
“This is clearly a deeply political decision,” the group wrote, rejecting the idea that the deal would harm British security. “You must protect sense and our jobs by allowing Nexperia to keep its Newport factory.”
For Elmos, German authorities initially indicated they would issue conditional approval, and even shared a draft approval after an intensive review process lasting about 10 months, the company said in a statement. What did Statement After the injunction.
Tim Schaefer, head of German antitrust and competition at Norton Rose, said the government intervention was also significant because “Elmos’ technology was quite old, cutting-edge in the 1990s, and arguably not of much industrial value.” ”
He said the transaction became a game in the public debate about Chinese investors taking part in key German technologies.
It’s possible that regulators are concerned about leaking technical information about how, according to Alexander Rennie, head of Munich-based international law firm Milbank’s European antitrust practice.
“Elmos is known for making chips for the automotive sector, which is Germany’s core industry and the pride of the country,” he said in an interview.
Both Elmos and Nexeria declined interview requests. A Nexeria spokesman told CNN Business on Tuesday that it was “considering its options with respect to the UK government’s decision.”
Chips are a growing source of tension between the US and China. Washington What is the announcement? Materials shortages are a national security issue, and highlight the importance of staying competitive in advanced technology capabilities.
That year, the United States stepped up its sanctions and pressured allies to enforce their own laws, according to Lowe. In August, U.S. Govt Ordered Two top chip makers, Nvidia
(NVDA) and AMD
(AMD)to curb exports of some high-performance chips to China.
Two months later, the Biden administration The unveiling Massive export controls that banned Chinese companies from buying advanced chips and chip-making equipment without a license. The rules also limit the ability of U.S. citizens or U.S. green card holders to provide support for the manufacturing or production of chips at certain manufacturing facilities in China.
The pressure is mounting. On Monday, NATO Secretary General Jens Stoltenberg urged the West to “be careful not to create new dependencies” on China. Speaking at NATO’s parliamentary assembly in Madrid, Stoltenberg said he sees “increasing Chinese efforts” to control Western critical infrastructure, supply chains and key industrial sectors.
He said that we cannot give any opportunity to authoritarian regimes to exploit our weaknesses and weaken us.
China has pushed back on its handling of two European semiconductor cases.
“We strongly oppose the UK’s move and demand that the UK respect the legitimate rights and interests of Chinese companies and provide a fair, just and (a) non-discriminatory business environment,” Chinese Foreign Ministry spokesman Mao Ning said. demand. Press briefing Last Friday when asked about the Newport wafer order. “Britain has inflated the notion of national security and abused state power.”
Zhao Lijian, another spokesman for the Chinese Foreign Ministry, Called Germany and other countries “avoid politicizing modest economic and trade cooperation” without specifically addressing Elmos at a press conference earlier this month.
Germany has increasingly scrutinized Chinese buyers this year. Last month, a bid by Chinese state shipping company Cosco Shares in Hamburg Port Terminal Operator gave rise to similar controversy. Under pressure from certain members of the government, the volume of investment was later limited.
Lawyers say that if chipmakers appeal, they could face an uncertain battle that could drag on for years.
In each case, they would need to file a court challenge within about a month of the regulators’ decisions, barring exceptional circumstances, according to Norton Rose.
Both Britain and Germany have recently introduced laws that increase government oversight of such decisions, making it harder to predict outcomes. In Germany, changes to foreign direct investment rules in 2020 mean the government can intervene in potential deals “if there is a ‘possible breakdown of public order and security,'” Schaefer said.
Previously, by contrast, it could only impose sanctions “if there was a ‘genuine, sufficiently serious threat to public order and security,'” he told CNN Business.
Andrea Hamilton, a London-based partner at Milbank, said that in Britain, the government’s ability to retrospectively review deals under the NSI Act was “really something that was perceived as surprising and far-reaching.”
“If challenged, as Nexaria apparently intends, this too will become a test case. [the] to the extent of limitations of the NSI Act,” it said.
Elsewhere, attention is turning to the Netherlands. The Dutch government is currently facing pressure from the US to limit exports to China, particularly from ASML.
(ASML)According to Lu at Eurasia Group, a semiconductor equipment manufacturer that holds a dominant position in the lithography machine market.
“This will become the next case study,” he told CNN Business.
The Netherlands has made it clear that it will make its own position.
When asked about the issue this month, Dutch Foreign Trade Minister Lise Schreinmacher said the country “will not duplicate US export restrictions on China.”
“We make up our own minds,” he said In an interview with the Dutch newspaper NRC.
— CNN’s Zahid Mahmood, Rose Robeck Kopec and Laura contributed to this report.