Nexperia NV acquired Welsh-based Newport Wafer Fab, which makes semiconductors mainly for the car industry, on Monday.
“We are looking into it. I have asked the National Security Adviser to review,” Prime Minister Boris Johnson told Parliament on Tuesday.
The U.K.’s Enterprise Act gives the government 30 days to either allow the deal to proceed or call it in for scrutiny. Nexperia’s parent company Wingtech Technology Co. Ltd. said in a statement earlier that the deal faces “uncertainties.”
Beside supplying automotive plants, Newport Wafer has been focusing on more advanced compound semiconductors that are at the heart of technologies such as 5G and facial recognition. The company also has strong ties to a number of U.K. universities.
Johnson told parliament that National Security Advisor Stephen Lovegrove will “judge whether the stuff that they are making is of real intellectual property value and interest to China, whether there are real security implications.”
“The government needs to call this in and block it,” said former Conservative Party leader Iain Duncan Smith in an interview. “This yet again shows that despite the legislation, despite all the earlier tough talk, the government is looking two ways on China. This sale is an investment disaster.”
Vetoing the deal could antagonize Beijing and signal a hardening of Britain’s stance on Chinese investments in the chip industry, which is at the center of a trade war between the U.S. and China.
While Johnson has blocked China’s Huawei Technologies Co. from taking part in Britain’s 5G wireless rollout, the government has tended to take a lighter-touch approach with chip industry deals.
Officials have waved through the sale of most of the U.K.’s major semiconductor firms including Arm Ltd., acquired by Japan’s SoftBank Group Corp. in 2016, and Imagination Technologies, which went to a Chinese-backed private equity firm in 2017.
A new law was passed this year giving sweeping powers for the government to intervene if takeovers are deemed a threat to national security. Ministers will have five years to scrutinize transactions and have powers to unpick them if they are judged a threat.