UK Imposes Semiconductor Blockade on China

Tuesday, November 22, 2022

Ahmed Adel, Cairo-based geopolitics and political economy researcher

Sino-British business relations are becoming increasingly strained, partly due to British concerns that China has achieved a new technological breakthrough. British Prime Minister Rishi Sunak did not meet face-to-face with Chinese President Xi Jinping during the G20 Summit in Bali, perhaps due to a lack of confidence in the positive outcome of such a meeting, especially as London recently targeted China’s semiconductor industry.

British Secretary for Business, Energy and Industrial Strategy Grant Shapps announced on November 16 that Chinese-funded tech company Nexperia must sell at least 86% of Newport Wafer Fab (NWF) in the UK under the National Security and Investment Act. Nexperia is a Dutch subsidiary of Chinese technology company Wingtech Technology Co.

NWF is the largest semiconductor chip company in the UK. Nexperia acquired an 86% stake in NWF last July, bringing its ownership rate in the company to 100%. Just before Nexperia took NWF, some UK MPs called for a block on its sale to China. The US, for its part, put pressure on London through diplomatic channels to block the deal, the Wall Street Journal reported.

Days before the UK blocked Nexperia from acquiring the largest microchip factory in the country, Sunak told Sky News that, “China poses a systemic challenge to both our values and our interests and it represents the single biggest state threat to our economic security and that’s why it’s right that we take the steps that are necessary to protect ourselves.”

British national strategy is closely intertwined with American policy, so it has no strategic autonomy of its own. The countries in the Five Eyes Alliance (Australia, Canada, New Zealand, the UK and the US) are making every effort to limit China’s progress, especially in the field of semiconductor development. 

London closely follows Washington in foreign policy and rejects pragmatic relations with China. By all accounts, Sunak, like Liz Truss and Boris Johnson before him, is unlikely to implement foreign policy independent of Washington.

London’s decision will further worsen the business environment for Chinese companies in the UK market. This decision reflects the downward trend in the development of Sino-British relations and is in line with the West’s policy of imposing a technology blockade on China.

It is recalled that in mid-October, American companies were banned from exporting semiconductors and chip-making equipment to China. The regulations also allow the US to prevent the export of chips made abroad with American technology.

Later, the German government, despite the positive outcome of the Sino-German summit in Beijing, banned the sale of the chip factory belonging to the German company Elmos to the Swedish company Silex because it was a subsidiary of the Chinese parent company Sai MicroElectronics.

The West is increasing the blockade of semiconductors because of concerns that Beijing could strengthen its position in the global technology market. The biggest worry for the West is that Chinese products can flood the global market. Even more worrisome for the West is that China has seized on the technological initiative to become a leading producer, dominating the semiconductor market in quantity and quality.

Moreover, this is closely related to the strengthening of China’s military potential, which the West is obviously trying to prevent.

London announced it was blocking the Chinese company’s takeover of the British chip factory on the same day that the Sino-British summit in Bali was cancelled. The cancellation of the meeting was officially explained away due to the scheduling of G20 events. This should only be believed with scepticism though.

None-the-less, the cancellation of the summit shows that the leaders of China and Britain have little to say to each other. Clearly, the Chinese side does not believe in the possibility of holding a constructive exchange that can yield results. This demonstrates that there is little trust between the two sides and why China will continue the path towards self-reliance.

British actions are very unlikely to slow down China’s technological advances. Rather, the West’s best opportunity is to re-invest into technological research, rather than self-destructive sanctions policies, austerity, and having an enormously over bloated military budgets caused by multiple wars and occupations.

Source: InfoBrics