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The UK needs a chips strategy by Zach Meyers
London wants chip-makers in Britain to support innovation. But using national security laws to engineer that outcome is counterproductive. Instead, the UK needs a more sober post-Brexit tech policy. The global supply chain for semiconductors is becoming more politicised. In October, the Americans unveiled new controls on exporting high-end chips and chip-making equipment to China, to constrain its ability to lead in new technologies like artificial intelligence. The US and EU are both promising large subsidies to onshore semiconductor manufacturing, fearful of relying on Taiwan for cutting-edge chips. The British government has been comparatively reactive. But after more than a year of equivocation, it has said that it will force a Chinese-owned firm, Nexperia, to unwind its purchase of the UK chipmaker Newport Wafer Fab (NWF), on national security grounds. The UK should instead focus on proactively nurturing its strengths. The UK’s approach to the NWF deal was chaotic. After it was announced in July 2021, the UK foreign affairs parliamentary committee labelled the deal “sovereignty for sale”, and some US lawmakers pressured London to reverse it. But reviews by the UK’s national security advisers apparently did not justify overriding the deal. Eventually, in May of this year, after increasing pressure from MPs, then business secretary Kwasi Kwarteng announced he would undertake a fresh retrospective review using the UK’s new foreign investment screening tool. A final decision was then postponed three times amidst Westminster’s broader political chaos.
There are indications that Kwarteng’s successor, Grant Shapps, may have decided to unwind the deal not because new national security concerns were discovered, but rather for political expediency and industrial strategy ambitions. The transfer of intellectual property to China poses the biggest threat: but the NWF has no technology that China does not already possess, and if that was a genuine concern then reversing the deal after 18 months would be too late. The government did not consult with Nexperia, which said it had proposed safeguards to address security concerns. And Schapps’ cited justifications for his decision are speculative. He implied the UK’s capabilities would be undermined if NWF became involved in sensitive chip-making activities in future, like making compound semiconductors. The government is devoting public funds to supporting this technology, which creates high-performance chips using non-silicon materials. Shapps was also worried that nearby chip firms and institutes in the South Wales tech cluster (several of which are also developing compound chips) could become security-compromised too. The government therefore clearly wants NWF to support the UK’s technological ambitions. But using national security laws to try to engineer that outcome is risky. NWF had been struggling for years, before its Chinese owners