The British government buys the factory to secure the military supply chain

What just happened? The new British Labor government appears to be placing greater importance on securing supplies of critical semiconductors needed for defense purposes thanks to its recent acquisition of the factory. It is difficult to say whether this approach will also lead to a more complicated process for approving acquisitions abroad that have national security implications. However, the nationalization of the semiconductor plant clearly signals that it is willing to intervene more actively in these industries.

The UK Ministry of Defense (MoD) has acquired a manufacturing facility to secure the supply of gallium arsenide (GaAs) semiconductors needed by the armed forces.

The plant in Newton Aycliffe, County Durham, northeast England, was previously owned by US manufacturer Coherent and was described by the ruling Labor Party as the only safe facility in the country capable of producing gallium arsenide components.

The deal suggests the UK will take a more proactive approach to directly securing critical semiconductor capabilities.

According to The Register, the Ministry of Defense paid about 20 million pounds ($26.7 million) for the plant, and a ministry spokesman told the publication that the exact amount was commercially confidential. The name of the facility will be changed to Octric Semiconductors UK.

The takeover aims to secure the UK’s defense supply chain and maintain domestic production of key components used by the military, including fighter jets.

GaAs semiconductors are valued for their superior electronic properties compared to silicon, including higher saturation electron velocity and greater electron mobility, making them particularly suitable for high-frequency and space electronics applications. GaAs transistors can be found in satellites, radars and radio communication devices. However, detailed information about the types of devices produced at the plant remains confidential.

Coherent decided to sell the facility earlier this year after losing Apple as a major customer. The Government intends to further invest in Octric Semiconductors UK over the coming years to increase defense industry capacity and exports.

The deal by the new British Labor government appears to have gone off with fewer complications compared to the previous Conservative administration’s approach to the recent purchase of Britain’s largest semiconductor plant by an American company.

In March this year, the UK government completed a lengthy review process and approved the acquisition of Newport Wafer Fab by Vishay Intertechnology. Approval required a complex series of ownership changes and regulatory scrutiny that took several years.

The facility was previously acquired by the Dutch company Nexperia in mid-2021. However, due to Nexperia’s ties to Wingtech, a company listed on the Chinese stock exchange, the government required the company to divest its majority stake in Nexperia on national security grounds.

Vishay, an American electronics manufacturer, then agreed to buy the factory in late 2023. However, the deal remained in limbo for several months pending national security authorization from the British Cabinet.

Labour’s approach to the Newton Aycliffe takeover appears to have improved, but it will certainly continue to keep a close eye on foreign takeovers, particularly those involving sensitive technology or potential national security implications.

“Semiconductors are at the vanguard of the technology we rely on today and will be crucial to securing the capabilities of our military in the future,” said British Defense Secretary John Healey. “This takeover sends a clear signal that our government will support British defense production.”