US-China chip war spills over into Europe – CNN | CarTailz


Hong Kong
CNN business

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

Last week, the new owner of Britain’s largest chipmaker was asked to reverse its takeover just days after the sale of another chipmaker in Germany was blocked. Both transactions were affected by national security concerns and involved acquisitions by Chinese-owned companies.

In the UK, Nexperia, a Dutch subsidiary of Shanghai-listed semiconductor maker Wingtech, was ordered by the government to sell at least 86% of its stake in Newport Wafer Fab, more than a year after it took control of the factory. Since then, employees have protested the decision, saying it will put nearly 600 jobs at risk.

In Germany, the Ministry of Economic Affairs prohibited chipmaker Elmos Semiconductor from selling its Dortmund factory to Silex, a Swedish subsidiary of Chinese company Sai Microelectronics.

Chip manufacturing was already emerging as a new front in tensions between the US and China. Now, the two troubled deals illustrate how pressure is mounting in Europe too, especially as Western officials face demands to keep key sectors out of Chinese control.

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

“US pressure definitely contributed to these decisions. [A] A growing sense of technological sovereignty is also likely to have prompted these moves—governments around the world are increasingly doing the same [viewing the] semiconductor industry as a strategic resource and trying to protect it from foreign takeovers.”

Legal experts said the two decisions were notable as each deal was initially believed to be done.

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

Nexperia said last week that it was “shocked” by the decision and that “the UK Government has chosen not to engage in any meaningful dialogue with Nexperia or even visit the Newport site”.

The company added that it had offered “to avoid activities of potential concern and to give the UK Government direct control and involvement in the management of Newport, a 28-acre site in South Wales.

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

in a (n open letter Speaking to the UK government last Thursday, the Nexperia Newport Staff Association said it was “incredulous” that staff livelihoods had been “put at risk” in the run up to Christmas.

“Clearly this is a deeply political decision,” the group wrote, dismissing the idea that the deal would undermine British security. “You must think rationally and protect our jobs by allowing Nexperia to keep their factory in Newport.”

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

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

“The transaction became a pawn in a public debate about the participation of Chinese investors in German key technologies,” he said.

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

According to Alexander Rinne, head of the European antitrust law practice of the international law firm Milbank in Munich, the supervisory authorities may fear an outflow of technical know-how.

“Elmos is known for making chips for the automotive industry, which is Germany’s core industry and the country’s pride,” he said in an interview.

Both Elmos and Nexperia declined interview requests. A Nexperia spokesman told CNN Business on Tuesday that it was “considering its options in relation to the UK Government’s decision”.

Chips are a growing source of tension between the United States and China. Washington has declared a material shortage a national security concern and stressed the importance of staying competitive in advanced technology capabilities.

According to Lu, the United States has tightened its own restrictions this year and urged its allies to enact their own. In August, the US government ordered two leading chipmakers, Nvidia (NVDA) and AMD (AMD), to stop exporting certain high-performance chips to China.

Two months later, the Biden administration unveiled sweeping export controls that banned 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 support the development or production of chips at certain manufacturing facilities in China.

The pressure is growing. On Monday, NATO Secretary General Jens Stoltenberg called on the West to “be careful not to create new dependencies” on China. Speaking to a NATO parliamentary assembly in Madrid, Stoltenberg said he saw “growing Chinese efforts” to control Western critical infrastructure, supply chains and key industrial sectors.

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

China has pushed back on handling the two European semiconductor cases.

“We strongly oppose the UK move and call on the UK to respect the legitimate rights and interests of Chinese companies and to provide a fair, equitable and (a) non-discriminatory business environment,” Chinese Foreign Ministry spokesman Mao said Ning, to the press briefing last Friday, when asked about the Newport Wafer order. “Britain has overextended the concept of national security and abused state power.”

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

Germany took a closer look at Chinese buyers this year. Last month, a bid by Chinese state-owned shipping giant Cosco for a stake in a Hamburg port terminal operator sparked a similar controversy. Due to pressure from some members of the government, the amount of the investment was later limited.

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

Barring exceptional circumstances, they would have to file a challenge in court within about a month of the regulators’ decisions, according to Norton Rose.

Both the UK and Germany recently added rules that increase government oversight of such decisions, making the outcomes more difficult to predict. In Germany, a change in foreign direct investment rules in 2020 meant the government could intervene in potential deals “when there is a ‘probable impact on public order and security,'” Schaper said.

So far, however, it can only impose restrictions “when there is a ‘real, sufficiently serious threat to public order and security,'” he told CNN Business.

In the UK, the government’s ability to retrospectively review deals under the NSI Act “was seen as really surprising and far-reaching,” said Andrea Hamilton, a partner at Milbank in London.

“If it is challenged, as Nexperia seems to intend, it will also become a test case [the] Scope of the limits of the NSI law,” she said.

Otherwise, attention shifts to the Netherlands. According to Eurasia Group’s Lu, 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 commands a dominant position in the lithography machinery market.

“That’ll be the next case study,” she told CNN Business.

The Netherlands have made it clear that they will form their own position.

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

“We make our own assessment,” she said in an interview with Dutch newspaper NRC.

– Zahid Mahmood, Rose Roobeek-Coppack and Laura from CNN He contributed to this report.

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