The UK government has announced that the semiconductor factory in Newton Aycliffe, County Durham, has been acquired by the Ministry of Defence (MoD) from its former parent company, US-based Coherent, and will be renamed Octric Semiconductors UK.

The UK government has announced that the semiconductor factory in Newton Aycliffe, County Durham, has been acquired by the Ministry of Defence (MoD) from its former parent company, US-based Coherent, and will be renamed Octric Semiconductors UK.

01 The Acquisition

The deal is said to be worth £20 million, according to The Daily Telegraph. Coherent had warned that the 310,000 square foot factory was at risk of closure or sale due to the loss of a significant revenue stream as Apple stopped working with it, the report said. However, the MoD acquired the factory, which was visited by Defence Secretary John Healey on Friday.

The factory is reportedly the only secure facility in the UK with the technology and capability to manufacture gallium arsenide semiconductors. This type of specialist semiconductor is used in a number of military platforms, including boosting the capabilities of fighter jets.

The Daily Telegraph noted that the factory provides important components for UK military platforms, including radar power amplifiers for the Royal Air Force's Typhoon fighter jets.

The British government said: "This acquisition will not only safeguard the future of this facility, which is vital to the defense supply chain and major military projects and exports, but will also secure up to 100 technical jobs in the Northeast." The British government also pointed out: "Semiconductors are essential to our modern life and are an essential component for the normal operation of almost all of our electronic devices, from mobile phones and computers to ventilators and power stations. The importance of semiconductors in military applications means that the technology can fill gaps in the military's future needs." The British government also said that the acquisition will also enhance the UK's defense industry capabilities and exports, and the government plans to invest in the company in the next few years. British Defense Secretary John Healey said during a visit to the plant: "Semiconductors are at the forefront of the technology we rely on today and will be crucial to ensuring the future capabilities of our army." Healey said: "This acquisition clearly shows that our government will support British defense production. We will protect and develop the UK's defense supply chain, support jobs in the Northeast, protect our military's key technologies, and enhance national security." The Daily Telegraph pointed out that the nationalization of a commercial factory this time marked a rare intervention by the Ministry of Defense to secure key suppliers. The newspaper mentioned the British government's decision in 2021 to nationalize Sheffield Forgemasters, which produces steel components vital to the UK's nuclear-powered submarine fleet, because the company's long-term financial difficulties triggered acquisition intentions from Chinese competitors.

This is also not the first case where Apple's cancellation of contracts has hit its suppliers.

02 History of British chip

In 2017, British chip design company Imagination Technologies was forced to put itself up for sale after a chip licensing dispute with Apple threatened its survival.

In April 2017, when Imagination Technologies announced that Apple would stop paying patent fees for its graphics technology used in iPhones, iPads, Apple Watches and other mobile devices, the company's market value evaporated by 70%.

Apple is Imagination's largest customer, contributing about half of its annual revenue. Apple is also its 8% shareholder, but has denied any intention to acquire the British company.

In the end, Imagination was acquired by Canyon Bridge Capital Partners, a private equity fund based in Beijing.

Reference link: 

https://www.silicon.co.uk/workspace/components/government-nationalises-one-of-uks-last-semiconductor-factories-581773

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