High court orders Chinese firm to sell majority stake in UK chip company

High court orders Chinese firm to sell majority stake in UK chip company

AI-generated image of a semiconductor resting on the scales of justice

The UK High Court has upheld a government order requiring Chinese state-backed investment firm FTDI Holding Limited (FTDIHL) to divest its 80.2% stake in British semiconductor company Future Technology Devices International (FTDI).

The investment firm sought to challenge the UK government’s order compelling the investment firm to sell its stake due to concerns about the potential transfer of UK-developed semiconductor technology to China and apparent risks to critical national infrastructure.

However, the High Court rejected FTDIHL’s request for interim relief, ruling that "the interests of national security must prevail”.

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FTDI is a stalwart in the semiconductor space, having produced chipsets for PC motherboards like those in IBM AMBRA computers in the early 1990s.

Today, it develops embedded semiconductor solutions used in data centre servers, consumer electronics, and industrial robotics.

Pat McFadden, the Chancellor of the Duchy of Lancaster, issued an order in November 2024 under the National Security and Investment Act 2021 to force FTDIHL to sell its majority stake in the semiconductor firm on national security grounds.

The investment firm, however, sought to temporarily suspend the divestment order until a full judicial review could be heard.

The court refused the request, citing national security risks associated with Chinese ownership of the semiconductor company.

Judges ruled that delaying the divestment would "prolong the period of the risk,” making interim relief inappropriate.

“We are unable to stigmatise as irrational (or otherwise vitiated by public law error) any of the following propositions: (a) the trigger event (the acquisition by the claimant of a substantial majority of the shares in FTDI) has given rise to a risk to UK national security; (b) the risk is a real and significant one; and (c) the grant of interim relief would prolong the period of the risk,” the court order reads.

In a statement to Capacity, FTDIHL’s legal representative, Katten Muchin Rosenman, said the firm was "disappointed” by the ruling, arguing it has never posed a risk to UK national security.

“One of the purposes of the injunction was to pause the requirement to divest FTDIHL’s shares in FTDI whilst the outcome of the judicial review proceedings remains undecided. As part of its application for the injunction, FTDIHL had proposed a package of interim measures which would have mitigated any perceived risk to national security.”

The court did, however, call for an expedited rolled-up hearing to consider the permission and substance of FTDIHL’s claim, a move welcomed by the investment firm.

“In addition, FTDIHL is pleased that the Court stated that ‘there is a realistic prospect that permission [for judicial review] would be granted on one or more grounds,’” a statement read.

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