A British chip factory involved in sensitive military projects has been nationalised by the Ministry of Defence following warnings that it was at risk of closure.
The Government confirmed on Friday that it had purchased the site in Newton Aycliffe, County Durham, from US company Coherent.
The deal is understood to be worth around £20m and will secure around 100 local jobs at the company, which is being renamed Octric Semiconductors UK.
A statement described the factory as the country’s only secure site capable of producing gallium arsenide semiconductors, making it “critical to the defence supply chain and major military programmes and exports”.
The deal comes after The Telegraph revealed the endangered factory was a supplier to defence giant Leonardo and had supplied vital components for British military platforms, including radar power amplifiers for Typhoon jets.
Former owner Coherent had warned the 310,000 sq ft site was at risk of being shuttered or sold after Apple dropped the business as a supplier, removing a key chunk of revenues.
John Healey, the Defence Secretary, visited the site this morning to greet employees.
During a tour, he told them: “Semiconductors are at the forefront of the technology we rely upon today, and will be crucial in securing our military’s capabilities for tomorrow.
“This acquisition is a clear signal that our Government will back British defence production.
“We’ll protect and grow our UK defence supply chain, supporting North East jobs, safeguarding crucial tech for our armed forces and boosting our national security.”
The takeover comes as Labour ministers are preparing to unveil a new industrial strategy aimed at boosting economic growth, with more intervention by the state in key industries. It also marks a rare intervention by the MoD to secure a critical supplier.
Another example of that was the decision in 2021 to nationalise Sheffield Forgemasters, which makes critical steel components for Britain’s nuclear-powered submarine fleet, following long-running financial struggles that had triggered approaches from Chinese rivals.
However, the chip factory deal also underscores the growing importance of semiconductors in military supply chains.
Semiconductors are critical to everything from smartphones to modern fridges and cars. In the military, they underpin precision missiles, fighter jets and communications equipment.
They are also seen as critical to future technologies, including artificial intelligence, quantum computing and hypersonic missiles.
The Telegraph first revealed in May that the site’s future was in doubt and undergoing a strategic review that could lead to the plant being sold.
In company accounts, Coherent said it had issued a last-time-buy notice to other customers warning them products would soon be discontinued, although Apple was not named in the accounts.
Before that, the group had warned that the decision by Apple to stop using the company as a supplier “places the ongoing viability of the business in doubt”.
But on Friday the Ministry of Defence said: “This strategic investment will ensure the facility is capable of producing gallium arsenide semiconductors as well as more powerful semiconductors in the future, which will include the latest technology.
“This Government recognises the strategic importance of semiconductors as a critical technology for the future of the UK and a significant enabler of the government’s growth and clean energy missions.
“Work has already started to implement best practice governance that will ensure appropriate financial oversight to secure the company’s future success.”
Losing a contract from Apple can often be disastrous for suppliers.
The British semiconductor company Imagination Technologies lost half of its value and was eventually sold after Apple said it no longer planned to use the company’s graphics chip designs in 2017.
Other companies including Volex and Wolfson Microelectronics have suffered share price declines after losing contracts.
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