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What just happened? The UK's new Labour government appears to be placing more importance on securing critical semiconductor supplies necessary for defense with its recent acquisition of a fab plant. Whether this attitude will also lead to a more complicated approval process for foreign-based acquisitions that have national security implications is hard to say. But by nationalizing a semiconductor plant, it is clearly signaling it is willing to intervene more proactively in these industries.
The UK Ministry of Defence (MoD) has acquired a fabrication plant to secure supplies of gallium arsenide (GaAs) semiconductors needed by the armed forces.
The site at Newton Aycliffe, County Durham in northeast England, was previously owned by US manufacturer Coherent and has been described by the ruling Labour Party as the only secure facility in the country with the ability to manufacture gallium arsenide components.
The deal suggests that the UK will be taking a more proactive approach to directly secure critical semiconductor capabilities.
The MoD paid about £20 million ($26.7 million) for the plant, according to The Register, with a ministry spokesperson telling the publication that the exact amount is commercially sensitive. The facility will be renamed Octric Semiconductors UK.
The goal of the acquisition is to secure the UK's defense supply chain and maintain domestic production of critical components used by the military, including fighter jets.
GaAs semiconductors are valued for their superior electronic properties compared to silicon, including higher saturated electron velocity and higher electron mobility, which makes them particularly suitable for high-frequency applications and space electronics. GaAs transistors can be found in satellites, radar, and radio communications devices. However, specific details about the types of devices produced at the site remain confidential.
Coherent decided to sell the facility earlier this year, after it lost Apple as its major customer. The government intends to invest further in Octric Semiconductors UK over the coming years to boost defense industrial capacity and exports.
This transaction by the UK's new Labour government seems to have proceeded with fewer complications compared to the previous Conservative administration's approach to the recent purchase of Britain's largest semiconductor facility by a US company.
This March, the UK government concluded a lengthy review process and approved Vishay Intertechnology's acquisition of Newport Wafer Fab. The approval required a complex series of ownership changes and regulatory scrutiny that spanned several years.
The facility had previously been acquired by Nexperia, a Dutch firm, in mid-2021. However, due to Nexperia's connection to Wingtech, a Chinese-listed firm, the government required the company to divest Nexperia's majority stake for national security reasons.
Vishay, a US-based electronics manufacturer, subsequently agreed to purchase the plant in late 2023. Yet the transaction remained in limbo for several months pending national security clearance from the UK Cabinet Office.
The Labour government's handling of the Newton Aycliffe acquisition appears to have been more streamlined, but it will surely continue to review foreign acquisitions carefully, especially those involving sensitive technologies or potential national security implications.
"Semiconductors are at the forefront of the technology we rely upon today, and will be crucial in securing our military's capabilities for tomorrow," said UK defence secretary John Healey. "This acquisition is a clear signal that our government will back British defense production."