Government orders China to sell stake in UK chipmaker

The government will force a Chinese tech company to sell its majority stake in a British chipmaker a year after The Times revealed that microchips it had sold to Russia were found in a tank destroyed in Ukraine.
The Cabinet Office issued a “final order” yesterday under the National Security and Investment Act mandating that the Chinese state-owned holding company that acquired an 80.2 per cent stake in FTDI must sell it within a “specified period”.
The order was given on the grounds that it was “necessary and proportionate to mitigate the risk to national security”.
• UK suppliers send $100m of key equipment to Russia
This was justified on the grounds that the move reduces the risk that “UK-developed semiconductor technology and associated intellectual property” could be “deployed in ways that are contrary to UK national security”.
It also said that Chinese ownership of FTDI might pose a risk to “critical national infrastructure which uses FTDI products”.
Tom Keatinge​​​​, director of the Centre for Financial Crime and Security Studies at the Royal United Services Institute, said: “This looks like an early opportunity for the new UK government to clearly indicate its strategy towards China.
“On the one hand, it will want to avoid blanket ‘de-risking’, on the other hand, it needs to ensure that national security is prioritised. With the change in US President, getting this balancing act right will only get harder.”
The order comes after The Times disclosed how the Scottish-based semiconductor business had sold a majority stake in its business to Beijing Jianguang Asset Management in December 2021, an asset management firm ultimately owned by the Chinese state.
The sale was approved despite concerns about the involvement of autocratic states in strategically important industries. Non-executive directors involved in the transaction said that the sale had been approved by regulators in Britain and Singapore, where many of the company’s staff are based.
Under its new owners, the company shipped semiconductors worth at least £225,000 to Russia after the country invaded Ukraine.
The company only stopped shipping to its Russian distributor after its bank, HSBC, refused to process payments for the exports, according to an FTDI email seen by The Times.
While the items exported by FTDI were not at the time in breach of UK sanctions, they were part of a list compiled by the European Commission of dual-use goods and advanced technologies that are used in Russian military systems or critical to their development.
At least one FTDI chip was later discovered in a Russian tank in Brovary, outside Kyiv, in March last year, according to researchers at the Yermak-McFaul Expert Group on Russian Sanctions and the Kyiv School of Economics.
At the time, they said that limiting Russia’s access to such items should be a “top priority” for Ukraine’s allies.
Ross Evans, a senior lawyer in Covington’s foreign investment practice, said that the consistent element from previous decisions was the UK government’s “continued focus on semiconductor technologies and IP.”
“This continues to apply across the field,” Evans said. “In this case to a business developing microcontroller and wired communications chips that ‘bridge’ modern computers to older equipment – not just to attention-grabbing cutting-edge and emerging semiconductor technologies.”
A government spokesman said: “Following a detailed national security assessment based on the evidence, the chancellor of the Duchy of Lancaster has taken the decision to impose a final order requiring FTDIHL to sell its 80.2 per cent shareholding in FTDI.”