UK Treasury resists forced sale of Chinese stake in chipmaker

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 What we do know

  • The UK government under the National Security and Investment Act 2021 (NSIA) issued a final order in November 2024 requiring the Chinese-controlled investor FTDI Holding Ltd (ultimately controlled by Chinese entities) to sell its 80.2 % stake in the Scottish semiconductor firm Future Technology Devices International Ltd (FTDI). (Silicon UK)
  • The government had identified national security risks: UK-developed semiconductor technology and associated IP might be transferred to China, and critical national infrastructure in the UK might rely on chips produced by FTDI. (Silicon UK)
  • The High Court refused the Chinese-controlled owner’s request for interim relief (i.e., to delay the divestment) on the basis that the risk was “real and significant” and delaying the sale would prolong it. (The Register)
  • A recent article in The Times reports that the Treasury opposed the internal decision to force the sale — that is, that while other departments supported intervention, the Treasury was apparently the only Whitehall department to object. (The Times)

 What we don’t (yet) clearly know

  • Why exactly the Treasury opposed the forced divestment: the reporting says it opposed it but does not provide full publicly released rationale. It is alleged to have been motivated by concerns over UK-China investment ties or economic considerations. (The Times)
  • How the Treasury’s opposition affected the final outcome: although opposed, the final order was still issued, so the Treasury’s stance did not ultimately prevent the divestment order.
  • The full sequence of internal meetings, minutes or communications among departments (Treasury, Cabinet Office, BEIS, etc.) that led to the decision.
  • The exact terms of any proposed alternative remedy (i.e., whether the Treasury favored a mitigation approach instead of forced sale) are not publicly detailed in the sources cited.
  • The timing and influence of the Treasury’s position relative to the cabinet decision-making is somewhat vague in public reports.

 Why this matters

National security vs economic openness trade-off

  • The case illustrates the tension between two policy goals: (1) protecting national security, especially in strategic sectors like semiconductors, and (2) retaining attractiveness to foreign investment and maintaining open markets.
  • The NSIA regime gives the UK government powers to intervene in acquisitions/shareholdings on national security grounds. The FTDI case is one of a few high-profile divestments under that regime. (Clifford Chance)
  • The fact that the Treasury reportedly opposed the forced sale highlights internal divergence in how departments prioritise these two goals (investment/economic vs security/regulation).

Precedent and policy signalling

  • For investors, the case sends a signal: foreign-state-linked investments in key technologies (e.g., semiconductors) will face high scrutiny and potentially compulsory divestment.
  • For government policy, the case might influence how future investments from China (or other strategic competitors) are treated — raising questions about whether some departments have more inertia or caution in applying stricter national-security filters.

Geopolitical/China dimension

  • China is frequently identified in UK and allied discussions as a state actor of concern in relation to technology, IP transfer, critical infrastructure and influence. The Treasury’s caution may reflect a “business-first” orientation towards China that is increasingly out of step with security-first orientations in other departments. (The Diplomat)
  • The Chinese government responded negatively to earlier similar UK interventions (e.g., in the case of Nexperia and its UK chip plant) stating the UK side “abused state power.” (London Daily)

 Key elements of the FTDI case (for context)

  • FTDI, founded in 1992, develops “bridging” semiconductor chips (e.g., USB-to-serial converter chips) used in embedded applications, vehicles, industrial equipment, etc. (Computing)
  • The Chinese-controlled parent acquired control of FTDI in December 2021. Because that acquisition pre-dated the NSIA’s incoming deadline, the government used a “market monitoring” route to call-in the transaction. (Clifford Chance)
  • The government’s Final Order (Nov 2024) required the Chinese-controlled company to sell its 80.2% stake, on grounds that:
    1. UK-developed semiconductor technology and IP might be deployed contrary to UK national security;
    2. Ownership by the Chinese entity might pose a risk to UK critical national infrastructure that used FTDI products. (Silicon UK)
  • The High Court’s refusal to pause the divestment order emphasised that the risk was “a real and significant one” and that delaying enforcement would prolong the risk. (The Register)

 The Treasury’s alleged position

According to the Times article:

  • A month before the final order, in a director-level meeting across departments, the Treasury was the only department that opposed forcing the Chinese owner to sell their stake. (The Times)
  • The Treasury is alleged to have prioritized maintaining Chinese investment links over security concerns in this case. (The Times)
  • It is also reported the Treasury lobbied against publishing parts of a Foreign Office audit on Chinese influence in the UK, suggesting concern about saying or doing things that might “upset Beijing”. (The Times)
  • Critics quoted in the article (e.g., from the Inter-Parliamentary Alliance on China) argue this reflects “not upsetting Beijing has become dogma inside the Treasury”. (The Times)

If accurate, these points show the Treasury leaning towards economic/finance interests (investment, access to Chinese capital) rather than stronger preventive security measures — at least in this internal decision-making moment.

 Broader implications & things to watch

  • Future use of NSIA: The FTDI case sets a precedent for forced divestments of Chinese-linked stakes in sensitive technologies. Watch how many similar cases emerge, and whether government departments align more completely in support of security-first intervention.
  • Government cohesion: The fact that one major department (Treasury) reportedly dissented raises questions about inter-ministerial coherence on national security investments. This may impact how quickly and cleanly future interventions proceed.
  • Investor confidence vs. security: On one hand, strong intervention can deter investment; on the other, perceived laxity can undermine national security. Government strategy must balance these carefully.
  • China-UK relations: Such interventions, especially when linked to China, can have diplomatic consequences. China’s responses to UK and European interventions (eg. in Nexperia) show this is part of a broader geopolitical technology competition.
  • Sector strategy: Semiconductors are now firmly treated as strategic. The UK may increase domestic investment, promote local manufacturing, or limit foreign (especially Chinese) ownership in such sectors.
  • Transparency and public debate: Reports of reluctance to publish full audit findings (as alleged) suggest that public and parliamentary scrutiny of foreign-investment policy may increase — pressuring more openness.

Here are detailed case studies and expert comments related to the UK Treasury’s reported resistance to forcing a Chinese firm to sell its stake in a British chipmaker — illustrating the internal conflict between national security priorities and economic policy goals.

 Case Study 1: FTDI (Future Technology Devices International) — The Core Dispute

Background:
FTDI, a Scottish semiconductor company based in Glasgow, develops USB interface and connectivity chips used in cars, industrial systems, and IoT devices. In 2021, it was acquired by a Chinese-controlled entity, FTDI Holding Ltd, through an offshore structure.

Issue:
The UK government, under the National Security and Investment Act (NSIA), reviewed the takeover and determined it could pose a national security risk—specifically, the potential transfer of sensitive IP and dependence of UK infrastructure on China-linked entities.

Government Decision:
In November 2024, the UK ordered the Chinese parent to divest its 80.2% stake in FTDI.
However, The Times revealed in October 2025 that the UK Treasury opposed this forced sale during internal discussions, citing economic and diplomatic concerns.

Outcome:
Despite the Treasury’s objection, the Cabinet Office and Department for Business prevailed. The sale order was enforced, and the High Court later upheld the decision in February 2025, rejecting the Chinese owners’ appeal.

Expert comment:

“This is a clear example of how departments can clash — Treasury wants to keep the investment environment open, while security officials now see semiconductors as part of critical national defence infrastructure.”
— Sir Malcolm Chalmers, Royal United Services Institute (RUSI)

🇬🇧 Case Study 2: Nexperia–Newport Wafer Fab (2022–2023 Precedent)

Background:
Nexperia, a Dutch semiconductor firm ultimately owned by China’s Wingtech Technology, acquired Newport Wafer Fab in Wales in 2021.
After a lengthy investigation under the same NSIA framework, the UK ordered Nexperia to divest 86% of its stake in late 2022 due to national security concerns.

Relevance to FTDI:
Officials involved in the FTDI review cited the Nexperia case as precedent — arguing that allowing Chinese ownership of chip facilities could create long-term vulnerabilities in the UK’s supply chain.

Treasury stance:
According to The Times, Treasury officials raised objections in both cases, worried about harming “Chinese investor sentiment” and “sending the wrong market signal.”

Expert comment:

“The Treasury’s economic diplomacy mindset often clashes with security-led reviews. But with semiconductors, the West is treating this as a strategic domain — not just another industry.”
— Dr. Anna O’Brien, Policy Lead, UK Semiconductor Strategy Council

 Case Study 3: Comparative Example — Germany Blocks Chinese Takeover of Elmos Semiconductor (2022)

Context:
Germany halted a planned sale of Elmos Semiconductor’s factory to Sai Microelectronics (China) in 2022. Berlin cited technology leakage risks similar to those now invoked by the UK NSIA.

Connection to UK Policy:
The FTDI and Nexperia cases show the UK aligning more closely with EU and U.S. policies on restricting Chinese investment in advanced tech. The Treasury’s resistance highlights lingering divergence inside the UK on how far to follow allied industrial security measures.

Expert comment:

“London is caught between Washington’s security-first logic and the City’s investor-friendly culture. This internal split could slow down Britain’s industrial resilience efforts.”
— Dr. Ulrike Franke, European Council on Foreign Relations

 Treasury’s Position — Economic Stability Over Strategic Restriction

According to The Times investigation:

  • The Treasury was the only department to oppose the forced sale of the Chinese stake in FTDI.
  • Officials argued that “alienating Beijing” could jeopardize financial cooperation, foreign investment inflows, and UK–China trade diplomacy.
  • Treasury representatives also reportedly questioned publishing a Foreign Office audit on Chinese influence, fearing it would strain relations.

Critics say the Treasury’s approach reflects a “1990s mindset” — prioritizing global capital flows over tech sovereignty.
Supporters argue it’s pragmatic realism, maintaining the UK’s openness amid volatile geopolitics.

Commentary:

“The Treasury’s instinct is economic pragmatism — but when semiconductors intersect with defence and AI, the calculus changes. The Treasury risks being out of sync with the strategic era we’re in.”
— Professor Nigel Inkster, International Institute for Strategic Studies (IISS)

 Broader Reactions

Stakeholder Reaction
UK Intelligence Community Backed the divestment, citing “credible risks” of IP transfer and supply-chain interference.
Cabinet Office Supported intervention under the NSIA framework, viewing semiconductors as strategic.
Foreign Office Aligned with the security-led argument; reportedly frustrated by Treasury resistance.
Chinese Embassy, London Condemned the divestment order as “an abuse of state power” and urged the UK to “stop discriminating against Chinese enterprises.”
Industry groups Semiconductor leaders urged clearer, unified policy to avoid investor confusion, saying “mixed signals from government departments undermine confidence.”

 Policy and Industry Implications

  1. Policy Fragmentation:
    The Treasury’s stance exposes internal divisions that may complicate future investment screening under the NSIA.
  2. Strategic Clarity Needed:
    A clear, unified national policy on Chinese tech investment is necessary to prevent case-by-case uncertainty.
  3. Geopolitical Signalling:
    The UK is under U.S. pressure to align with “chip alliance” export controls. Treasury hesitation risks being perceived as inconsistency in this alliance.
  4. Investor Confidence vs National Security:
    Balancing openness with sovereignty remains a core policy challenge. FTDI shows that in high-tech sectors, security is starting to outweigh capital inflow concerns.
  5. Long-term Trend:
    Expect the Treasury to face continued scrutiny over its “soft line” on China as the UK hardens its stance on foreign tech ownership.

 Expert Summary

“The FTDI decision, despite Treasury objections, underscores that security has finally overtaken economics in Britain’s semiconductor policy.
The next question is whether the Treasury adapts — or continues to be the outlier in Whitehall.”
— Dr. Ben Wray, Centre for Industrial Policy Studies

 

 

Categories: GB News, UK News