The British government has recently issued an order for a Chinese-owned holding company to sell its shares in a Scottish semiconductor business, FTDI, following a national security assessment. This move comes under the United Kingdom’s National Security and Investment Act 2021, which allows the government to scrutinize and intervene in business transactions to protect national security, especially in sensitive areas of the economy.

FTDI, a semiconductor design business based in Glasgow, was acquired by a holding company with Chinese directors three years ago, prompting a review by the government. As a result of the review, the Chancellor of the Duchy of Lancaster has ordered the holding company to divest its 80.2% stake in FTDI within a specified period and following a specified process.

The decision to require divestment was made to mitigate the national security risks associated with British-developed semiconductor technology and intellectual property being used in ways that could pose a threat to UK national security. It also aims to prevent FTDI’s technology and intellectual property from being utilized in a manner that could endanger critical national infrastructure.

This action by the British government follows the acquisition of the UK’s largest microprocessor factory, the Newport Wafer Fab, by Chinese-owned Nexperia in 2021. The acquisition initially received approval from the Department for Business and the National Security Advisor but was later criticized in a report titled “Sovereignty for Sale” by the Foreign Affairs Committee for failing to uphold British national interests.

In response to concerns over national security, the British government has ordered Nexperia to sell at least 86% of the acquired company, citing risks related to technology and know-how that could undermine UK capabilities. Additionally, the government recently established the National Protective Security Authority (NPSA) as part of MI5 to help businesses defend against state-sponsored attempts to steal sensitive research and information.

In a broader context, the UK government has also tightened restrictions on semiconductor exports to China and implemented export controls to limit China’s access to advanced semiconductor chips and technology. This aligns with similar actions taken by the US Commerce Department to restrict China’s ability to obtain crucial semiconductor components for military applications.

Furthermore, recent reports indicate that U.S. semiconductor toolmakers are cutting ties with Chinese companies in response to pressure from Washington, highlighting the growing concerns over national security and protection of sensitive technologies. These developments underscore the increasing importance of safeguarding critical industries and technologies in an era marked by geopolitical tensions and competition.

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