On November 17, Wentai Technology (600745. SH) announced that Anshi Semiconductor, a wholly-owned subsidiary of the company, was forced to sell at least 86% of the shares of Newport Wafer Fab ("NWF"), a British semiconductor company that had previously been acquired, after receiving the official notice from the British Ministry of Commerce, Energy and Industrial Strategy.

The reason given by the British side is that the acquisition endangers national security. "We welcome foreign trade and investment in support of growth and employment, but if we find that there are risks to national security, we will act decisively," said Grant Shapps, Minister of Business, Energy and Industrial Strategy of the United Kingdom.

At the Foreign Ministry press conference on the afternoon of November 18, Foreign Ministry spokesman Mao Ning said that the British side generalized the concept of national security, abused national power, directly intervened in the normal investment and cooperation of Chinese enterprises in the UK, damaged the legitimate rights and interests of relevant enterprises, and seriously violated the market economy principles and international trade rules advocated by the British side. China is firmly opposed to this. The British side should earnestly respect the legitimate rights and interests of Chinese enterprises and provide a fair, just and non discriminatory business environment for enterprises in all countries.

In the past year or two, Chinese enterprises have frequently encountered difficulties in acquiring overseas semiconductor assets.

｜ It is increasingly difficult for Chinese chip enterprises to conduct overseas mergers and acquisitions

In 2020, Shenzhen Investment Holding Co., Ltd. planned to acquire 70% of the shares of LPE, an Italian semiconductor equipment company, which was vetoed by the Italian government using the "Golden Power Act". With this bill, the Italian government has repeatedly vetoed the acquisition of Chinese enterprises.

In 2021, China Zhilu Capital plans to acquire South Korean semiconductor company Meghner at a premium of 1.4 billion US dollars (about 8.9 billion yuan). As Meghner is a Korean company listed in the United States and subject to the supervision of the CFIUS, the US side delayed approving the transaction, and the transaction was eventually terminated.

Recently, the German Federal Ministry of Economic Affairs and Climate Action stopped the acquisition of China Sai Microelectronics, which also involves the country's auto semiconductor assets.

Overseas M&A is a shortcut to quickly acquire technology and expand scale. However, various signs show that it is increasingly difficult for Chinese chip enterprises to conduct overseas mergers and acquisitions, highlighting the importance and urgency of speeding up domestic substitution and solving the "choke" problem of key core technologies.

These governments regard the semiconductor industry as "national core technology" and "strategically important industry", and regard self-sufficiency of the semiconductor supply chain as the top priority of national security.

| Wentai Technology emphasizes little influence

Wentai Technology emphasized that NWF's acquisition amount, revenue and net profit accounted for less than 1% of the company's corresponding indicators, which had little impact on the company. Its current capacity contribution did not have a significant impact on the company's production and operation.

As of September 30, 2022, NWF had total assets of about 475 million and net assets of about 211 million. From January to September this year, NWF realized operating revenue of about 318 million, accounting for about 2.65% of the revenue of Anshi Semiconductor, accounting for about 0.76% of the company's operating revenue, and net loss of about 35 million.

According to the data, NWF is mainly engaged in power devices with mature manufacturing processes. Anshi Semiconductor was once the company's customer and the second largest shareholder. In 2021, Wentai Technology acquired 86% of NWF's equity through Anshi Semiconductor by paying cash consideration, with a total transaction amount of about 14.66 million pounds (equivalent to about 130 million yuan), to strengthen the layout of car specification semiconductor.

The production capacity and process capability of the NWF wafer factory in the fields of vehicle scale IGBT, power MOSFET, analog chip and compound semiconductor can be integrated with the existing product and process capabilities of the Anshi Group. Last year, Wentai Technology has started the gradual switch from NWF OEM capacity to IDM's own capacity to seize the opportunity of new energy intelligent vehicle development.

| The official attitude of the United Kingdom is reversed

In response to this acquisition, there has been a constant voice of opposition within the UK, demanding a review of this acquisition. In May this year, British government departments said that they would reassess the case that Anshi Semiconductor, a subsidiary of Wentai Technology, acquired NWF.

In fact, although NWF Newport Semiconductor Wafer Factory is relatively small, it is the largest wafer manufacturing enterprise in the UK. At present, the foundry capacity has exceeded 35000 wafers per month, with less than 500 employees. With the semiconductor industry becoming more and more important today, the UK attaches great importance to the company's chip manufacturing capability. According to Anshi Semiconductor, the factory has the background of supplying parts for automobile and medical companies.

In the past period, the British government has experienced three changes of Prime Minister, which is one of the important reasons for the change of this M&A case. On the other hand, the United States intervened in Sino British trade. According to US media reports quoted by Globegroup, before the British side evaluated the acquisition, a diplomat of the US Embassy in the UK lobbied the UK. Although he did not ask the UK to cancel the acquisition, he made it clear that the US would prefer the UK to do so. A spokesman for the Chinese Embassy in Britain said that commercial activities should not be subject to such interference by the United States, which violated international trade rules.

According to British media reports, Drew Nelson, the former owner of NWF, is seeking to buy back the company. Two insiders said that he and Palladian Investment Partners, a private equity group, jointly bid for the company to regain control.