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LONDON – Newport Wafer Fab, a chip plant in Wales that’s been sold to Chinese-owned Nexperia, has over a dozen U.K. government research contracts, according to a document seen by CNBC.
The contracts are largely funded by Innovate UK, the U.K. government’s innovation agency, through various grant schemes that amount to around £55 million ($75 million), a person close to the deal, who wanted to remain anonymous due to the sensitive nature of the discussions, told CNBC.
“I don’t think anybody realized that there were a couple of defense-related projects in there,” said the source.
NWF, which employs around 450 people in the Welsh city of Newport, in the U.K., makes the wafers that electronic circuits are printed onto. While Nexperia is based in the Netherlands, it is owned by Chinese-headquartered Wingtech, which is partially owned by state-backed investors. Nexperia declined to comment on this article and Wingtech did not immediately respond to a CNBC request for comment.
U.K. Prime Minister Boris Johnson ordered his national security advisor, Stephen Lovegrove, to investigate the acquisition after lawmakers in his party said it should be blocked on security grounds. “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.
Lovegrove, whose office did not immediately respond to a CNBC request for comment, is expected to announce his verdict in the next few weeks.
Companies and individuals with knowledge of NWF were asked by Lovegrove’s team last week what the plant does and who for, the CNBC source said. The source added that Lovegrove’s team has been provided with a list of NWF’s contracts, seen by CNBC, and informed that Nexperia plans to terminate some of them so that it can focus on sending chip wafers back to China.
A person familiar with Nexperia, who preferred to remain anonymous due to the nature of the discussions, denied this is the case and said the company will honor any existing contracts. However, the source stressed there would be nothing Nexperia could do if NWF’s outgoing Chairman Drew Nelson decides to take the U.K. government contracts to his new fab, which he is spinning off as part of the deal.
The Innovate U.K. contracts are one of the issues under negotiation as part of the spin off, according to a third source close to the deal, who also asked to remain anonymous due to the nature of the discussions.
One NWF defense contract involves developing chip technology with Cardiff University for a radar system that would be used in fighter jets. The £5.4 million project aims to deliver technology to defense contractor Leonardo, missile developer MBDA and aerospace chipmaker Arralis.
“Britain has paid for the research that makes Newport Wafer Fab a key partner in a U.K. government defense project,” Tom Tugendhat, leader of the U.K. government’s China Research Group and chairman of the Foreign Affairs Select Committee, told CNBC. “That’s why we need a complete review of the decision on national security grounds, including asking why the deal was initially waved through.”