A Chinese company has been ordered to give up its ownership of a British semiconductor manufacturer after the UK government ruled it was a security risk.

Nexperia, owned by Shanghai-based Wingtech, had bought Newport Wafer Fab in July 2021 but must now sell at least 86% of its stake following a review.

Nexperia said the ruling threatened jobs and the economy and promised to appeal.

"The decision is disproportionate given the remedies Nexperia has proposed. It is wrong for the employees, for the UK semiconductor industry, for the UK economy and for the UK taxpayer - who could now be faced with a bill of over £100m for the fallout from this decision," Toni Versluijs, head of its UK operations said.

He suggested Newport Wafer Fab was facing collapse when Nexperia stepped in and that more than 500 jobs were at risk if the company was now forced to withdraw.

The UK's review found that having the country's biggest maker of semiconductors ultimately under Chinese ownership could undermine capabilities in a vital strategic asset. It also indicated that the company's presence in an area with a strong technology industry could prevent other nearby businesses from working on sensitive projects such as defense work.

'Politicization'

The U.S. has been seeking to prevent China from acquiring semiconductors, which are an essential component of millions of goods from mobile phones, to cars and fighter-jets to missiles.

China has previously criticized the British government for politicizing economic decisions following a ban on Huawei working on key parts of the UK's 5G telecommunications network. According to industry figures, that decision will cost billions of dollars and slow the roll out of the network by years. The UK government said it was necessary on security grounds.