How a Welsh microchip factory became a national security nightmare

Kwasi Kwarteng, the Business Secretary, has said the sale continues to be assessed, and insisted that the Government stands ready to reverse the takeover if it decides to.

“Their position on this is confused and it’s contradictory, and that’s the most charitable interpretation you can put on it,” says Lord David Alton, a crossbench peer who is one of seven MPs or peers to be sanctioned by China. “It beggars belief that you would sell your biggest manufacturer of microchips to a hostile state.”

Officials at the Department for Business ordered a security review into the sale before it was announced, but found no reason to block it. However, news of the deal prompted a backlash from hawkish MPs such as Sir Iain Duncan Smith, who said the Government had found itself in an “unholy mess” and Tom Tugendhat, the chair of the Foreign Affairs Committee.

When questioned by Mr Tugendhat in July, Boris Johnson revealed that he had asked Sir Stephen Lovegrove, the national security adviser, to “look again” at the issue. 

However, he defended Chinese investment in Britain. “I do not want anti-China spirit to lead to our trying to pitchfork away every investment from China into this country. I have to say that I think that would be economically foolhardy,” the Prime Minister said.

Following accusations that no such review had taken place, business minister Lord Martin Callanan said this month that the deal was still being investigated. 

Kwarteng has the power to refer it under new national security powers, which could mean the takeover being reversed, but time is running out. 

January’s National Security and Investment Act allows ministers to block takeovers retroactively, but only for the first six months of its existence, giving the Government a deadline of early July.

Sophia Gaston of the British Foreign Policy Group think tank says the deal is complicated by Newport’s perilous position before the takeover, which could mean blocking it would require some level of taxpayer support for the factory. 

“You couldn’t have chosen a more difficult example for the very beginning of the new review structure for these kinds of acquisitions,” she says. “It’s an environment in which the government intervening in these sorts of things means it may well need to take a financial stake in that business to ensure its survival.”

A decision is believed to have been put on hold until next month, when a wider semiconductor strategy is published by the Department for Digital, Culture, Media and Sport. 

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