Nexperia and Elmos cases show how the US-China chip war is spilling over to Europe


Hong Kong
CNN Business

Two European chip deals have run into trouble over ties to China, a sign of growing concern in the West over potential Chinese control of critical infrastructure.

Last week, the new owner of Britain’s biggest chip maker was ordered to stop the takeover, just days after the sale of another chip factory was blocked in Germany. Both transactions were affected by national security concerns and involved purchases of Chinese-owned companies.

In the UK, the government ordered Nexperia, the Dutch arm of Shanghai-listed semiconductor maker Wingtech, to sell at least 86% of its stake in Newport Wafer Fab, more than a year after taking control of the fab. Employees have been protesting the decision ever since, saying nearly 600 jobs are at risk.

In Germany, Elmos Semiconductor, a maker of automotive chips, has been barred by Germany’s economy ministry from selling its factory in Dortmund to Silex, the Swedish subsidiary of China’s Sai Microelectronics.

Chipmaking has already emerged as a new front in US-China tensions. Now the two troubled deals illustrate how pressure is mounting in Europe as well, especially as Western officials face calls to keep key sectors outside Chinese control.

“These decisions mark a shift to tougher stances on Chinese investment in critical industries in Europe,” said Xiaomeng Lu, director of geotechnology at Eurasia Group.

“US pressure certainly contributed to these decisions. [A] a growing sense of technological sovereignty is likely to have fueled these moves as well – governments around the world are increasingly [viewing the] semiconductor industry as a strategic resource and try to protect them from foreign takeovers.

Legal experts said the two decisions were significant because each deal was initially thought to be approved.

The Newport Wafer case is “the first completed acquisition” to be reversed under the UK’s National Security and Investment (NSI) law, which came into full force in January, according to Ian Giles, head of antitrust and competition for Europe , Middle East and Asia for Norton Rose.

Nexperia said last week that it was “shocked” by the decision and that “the UK Government has decided not to enter into a meaningful dialogue with Nexperia or even visit the city of Newport.”

Also Read :  Security forces tear gas students defying Iran protest ultimatum

The company added that it had offered to avoid “any activity that might cause concern and to provide the UK government with direct control and involvement in the management of Newport, a 28-acre site in south Wales.”

A worker in a silicon semiconductor wafer cleanroom at the Nexperia-owned Newport Wafer Fab in Newport, Wales on August 18.

The factory produces silicon wafers, the basis for making computer chips. Many of its products eventually power cars and medical equipment. Nexperia indicated that workers at the plant now face an uncertain future.

In an an open letter The Nexperia Newport staff union told the UK government last Thursday that it was “unbelievable” that staff’s livelihoods were “at risk in the run-up to Christmas.”

“This is clearly a deeply political decision,” the group wrote, rejecting the idea that the deal would undermine British security. “You need to understand and protect our jobs by allowing Nexperia to keep its factory in Newport.”

For Elmos, German authorities initially indicated they would grant conditional approval and even shared a draft approval after an intensive review process that lasted about 10 months, the company said in a statement after the order.

Tim Schaper, head of antitrust and competition for Germany at Norton Rose, said the government’s intervention was also significant given that “Elmos’ technology is said to be quite old, state-of-the-art in the 1990s and allegedly not of great industrial importance .”

“The transaction has become a game of public debate about the takeover of Chinese investors’ stakes in key German technologies,” he said.

The sign of the Elmos Semiconductor company seen on November 9 in the German city of Dortmund.

It’s possible regulators were worried about the drain on technical know-how, says Alexander Rinne, head of the European antitrust practice at international law firm Milbank, based in Munich.

“Elmos is known for making chips for the automotive sector, which is a core German industry and the pride of the country,” he said in an interview.

Elmos and Nexperia declined interview requests. A spokesperson for Nexperia told CNN Business on Tuesday that it is “assessing its options in light of the UK government’s decision.”

Also Read :  As major powers meet in Asia, the rest of the world is pressed to pick a side

Chips are a growing source of tension between the US and China. Washington has declared the materials shortage a national security issue and emphasized the importance of maintaining competitiveness in advanced technological capabilities.

This year, the United States has increased its restrictions and pressured allies to impose their own, Lu says. In August, the U.S. government ordered two top chipmakers, Nvidia ( NVDA ) and AMD ( AMD ), to stop exporting some high-performance chips to China.

Two months later, the Biden administration unveiled sweeping export controls that barred Chinese companies from buying advanced chips and chip-making equipment without a license. The rules also limited the ability of US citizens or US green card holders to provide support for the development 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 a new dependency” on China. Speaking at the NATO Parliamentary Assembly in Madrid, Stoltenberg said he was seeing “growing Chinese efforts” to control the West’s critical infrastructure, supply chains and key industrial sectors.

“We cannot give authoritarian regimes any chance to exploit our vulnerability and undermine us,” he said.

China has refused to consider two European semiconductor cases.

“We strongly oppose the UK’s move and call on the UK to respect the legitimate rights and interests of Chinese companies and ensure a fair, just and (a) non-discriminatory business environment,” Chinese Foreign Ministry spokesman Mao Ning told the public. last Friday when asked about the Newport Wafer order. “The UK has overstretched the concept of national security and abused state power.”

Zhao Lijian, another spokesman for China’s foreign ministry, urged Germany and other countries to “refrain from politicizing normal economic and trade cooperation” at a news conference earlier this month, without specifically referring to Elmos.

Germany has shown greater control over Chinese buyers this year. Last month, a bid by Chinese state-owned shipping giant Cosco for a stake in a port terminal operator in Hamburg sparked a similar controversy. Under pressure from some members of the government, the size of the investment was later limited.

Also Read :  UK economy shrinks at start of feared long recession

If the chipmakers appeal, lawyers say, they could face an uncertain battle that could drag on for years.

In any case, you should file a court appeal within about a month of the regulators’ decision, except in exceptional circumstances, says Norton Rose.

Both Britain and Germany have recently added rules that expand government control over such decisions, making outcomes harder to predict. In Germany, a 2020 change to foreign direct investment rules meant the government could intervene in potential deals “if there is a ‘likely threat to public order and security,'” Schaper said.

By contrast, it previously could only impose restrictions “if there was a ‘genuine, sufficiently serious threat to public order and security,'” he told CNN Business.

In the U.K., the government’s ability to retroactively review deals under the NSI Act was “really something that was seen as surprising and far-reaching,” said Andrea Hamilton, a London-based partner at Milbank.

“If challenged, as Nexperia apparently intends, it will also become a test case [the] it covers the limitation of the NSI Act,” she said.

Elsewhere, attention turns to the Netherlands. The Dutch government is currently facing pressure from the United States to limit exports to China, particularly from ASML ( ASML ), a semiconductor equipment maker that has a dominant position in the lithography machine market, according to Eurasia Group’s Lu.

“This will become the next case study,” she told CNN Business.

The Netherlands has made it clear that it will formulate its position.

Asked about this month, Dutch Foreign Trade Minister Liesje Schreinemacher said the country “will not copy US export restrictions on China one for one.”

“We judge ourselves,” she said in an interview with the Dutch newspaper NRC.

— CNN’s Zahid Mahmood, Rose Roobeek-Coppack and Laura He contributed to this report.



Source

Leave a Reply

Your email address will not be published.

Related Articles

Back to top button