Cyber Defence, China, Huawei, Mergers And Acquisitions, Internet Security

Cyber Defence, China

Sale of semiconductor factory to Chinese-owned firm presents bigger UK risk than Huawei

Ciaran Martin, the UK’s former cybersecurity chief, has criticised the Government's failure to set out why it did not intervene

7/25/2021 5:11:00 AM

The sale of the country’s largest microchip factory to a Chinese-owned firm poses a bigger risk to Britain’s strategic interests than Huawei ’s involvement in the 5G network, the UK’s former cybersecurity chief warns.

Ciaran Martin, the UK’s former cybersecurity chief, has criticised the Government's failure to set out why it did not intervene

Ciaran Martin, the former head of the National Cyber Security Centre (NCSC), said the takeover of Wafer Fab, a semiconductor manufacturer in Newport, was both “puzzling” and “inconsistent” with the Government’s wider stance on Beijing.In an interview with The Telegraph, Mr Martin said the acquisition of the plant formed part of China’s wider strategy to achieve “clear technological superiority” over the West.

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It comes several months after it was announced that the Wafer Fab plant, the largest producer of semiconductors in the UK, would be sold to Nexperia, which is headquartered in the Netherlands and owned by the Chinese firm Wingtech Technology.Semiconductors allow electricity to flow through devices and are crucial components in medical equipment, smartphones, radios and TVs.

However, experts have warned there is currently a global shortage, making domestic production increasingly important, with fears also mounting that China becoming a global powerhouse in these areas could lessen the impact of Western sanctions.Sale now under review The sale is now being reviewed by Sir Stephen Lovegrove, the UK’s national security adviser, with Mr Martin stating he does not want to prejudge his findings on any potential risk to national security.

Heaping pressure on Prime Minister Boris Johnson, Mr Martin criticised the Government’s failure to set out why it had not blocked the sale initially, adding that there were “very real concerns” and the “starting presumption” was that it was “very strategically significant”.

Mr Martin ranked the sale as a “level one” or top priority issue, because of the vital importance of ensuring the country has “sovereign capacity” over the production of key technologies, such as microchips.A second level priority for the UK and the West is dealing with China’s attempts to “dominate the technological ecosystem” by controlling the supply of “physical materials”, such as semiconductors, and attempting to rewrite global standards.

In comparison, he said the sale of Chinese technology to the UK, such as with Huawei and 5G equipment, sits at the bottom at “level three”.“Huawei in the periphery of 5G only really mattered because the Trump administration became obsessed with it for reasons they never convincingly set out,” he continued.

“By contrast the future of semiconductor supply is a first order strategic issue. It goes to the heart of how we should be dealing with China.”Mr Martin’s intervention will be seen as particularly significant because he was head of NCSC when it altered its security assessment last year that equipment made by Huawei, the Chinese telecoms giant, could no longer be guaranteed as safe.

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It came amid growing pressure from Washington and Tory MPs to reverse Theresa May’s decision to allow Huawei to participate in the non-core part of the 5G network, with Mr Johnson later announcing that all its equipment would be removed from the network by 2027.

However, the Prime Minister is facing a fresh rebellion over the Government’s failure to block the sale of the Newport plant, with Tory MPs arguing that ministers had recently passed the National Security and Investment Act to prevent such takeovers from happening.

Government poised to act Ministers have now cut off taxpayer-funded payments to the plant, while Mr Johnson has ordered Sir Stephen to review the security implications of the sale, insisting that the Government will not hesitate to step in if required.

Senior figures at Nexperia have insisted there are no security risks in the takeover and that they are confident the review will come down in the company’s favour.However, Mr Martin has challenged the Government’s failure to set out its reasons for allowing it to go ahead initially, telling The Telegraph: “I want to wait to wait for Sir Stephen’s review, but my criticism of the Government is that it nodded it through without any explanation. The starting presumption is that this is very strategically significant and there are very real concerns.

“It might be after really serious analysis the Government decides there are reasons to let the takeover go ahead. But if so, they would need to set out very, very clear, convincing and easy to understand public argument as to why the sale of a leading microchip manufacturer to Chinese ownership is not a strategically unwise decision.”

Mr Martin added that while the Trump administration and some Tory MPs had attempted to make Huawei the “defining issue” in standing up to China, it was instead “stuff like this” that would determine whether the West’s approach succeeded.“China's mission isn't to dominate us by selling to us, its mission is to out-compete us and be better, and then dominate all standards and supply chains,” he continued.

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Setting out three areas of concern, ranked from level one to three, he added: “Level one is clear technological superiority. They will have better tech than us, better AI, better 5G obviously make more money, wield more power. It is basically a race over innovation.

“Level two is about controlling and dominating the technological ecosystem...the supply of physical materials, and semiconductors is part of that, and standards bodies...and how the global standards which give the West a big advantage are coming under pressure.

“Level three is who sells to whom. Huawei is level three. Newport Wafer Fab is a first level issue and a second level issue. It is about whether we have sufficiently good, reliably Western capabilities of our own. So on many fronts its a more important decision than Huawei.”

A Government spokesman said: “We have considered this issue thoroughly, and will continue to monitor the situation closely. The National Security Adviser is reviewing this case and we will not hesitate to take further action if needed. Read more: The Telegraph »

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