According to the Wall Street Journal, a deal to buy U.K semiconductor from a Chinese-owned company may fall apart after the U.S. intervenes. 

The U.K government on May 25 started a national security probe into the deal from a Chinese-controlled firm of a British chip factory. 

Britain’s business secretary said, “We welcome overseas investment, but it must not threaten Britain’s national security.” 

A spokeswoman for the British government also noted that“We are committed to the semiconductor sector and the vital role it plays in the U.K.’s economy.”

According to the British national security and investment law, the government has the right to review and, if necessary, intervene in certain acquisitions on national security grounds, or even reject them outright.

Sources close to the matter told the outlet that a diplomat from the U.S. Embassy in the U.K. had made it clear to British officials that the U.S. preferred the deal reversed. The diplomat said that if the semiconductor is still in the U.K., it could help the U.K. become a production center for key chips for electric vehicles. 

The deal involves Nexperia’s 79 million dollars purchase of a British chip factory, Newport Wafer Fab. Nexperia is a Dutch subsidiary of China’s Wingtech Technology.

The Wall Street Journal cited a data firm, saying Chinese government entities or state-owned enterprises control about 22% stake in Wingtech.

In response, a spokesperson for the Chinese Embassy in the U.K. said that the U.S. violated international trade rules when intervening in such commercial activities.

The recent moves signal that now Western countries have increasingly taken strong steps  to protect their semiconductor industry. 

In recent years, the Chinese regime has pushed up its ambition to achieve global chip dominance as a part of its Made in China 2025 plan. 

To help the chip industry, in 2014, the communist regime set up a National Semiconductor Fund of 23 billion dollars. Another 30 billion dollar investment was announced in 2019. Local governments have spent at least 25 billion dollars more into their own such funds. In 2020, the government also put out a ten years of corporate-tax exemption for the most advanced chip makers.

Last month, China reportedly lobbied American firms to convince the U.S. Congress not to pass the CHIPS act that would invest 52 billion dollars in semiconductor manufacturing subsidies and bolster U.S. competitiveness with China’s technology. 

Chinese officials have even warned the U.S. companies that they risk losing market share or revenue if the bill becomes law.

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