The British government on Wednesday ordered a Chinese-owned holding company to sell its shares in a Scottish semiconductor business following a national security assessment.

Under the United Kingdom’s National Security and Investment Act 2021, the government can “scrutinise and intervene in business transactions, such as takeovers, to protect national security” in 17 sensitive areas of the economy.

Future Technology Devices International (FTDI) is a semiconductor design business based in Glasgow. Three years ago, it was acquired by a holding company with Chinese directors, triggering a review.

According to a government notice, the review has resulted in the Chancellor of the Duchy of Lancaster, the head of the Cabinet Office, to order this holding company to sell its 80.2% stake in FTDI “within a specified period and following a specified process.” 

The divestment was deemed necessary to mitigate the national security risks of British-developed “semiconductor technology and associated intellectual property being deployed in ways that are contrary to UK national security.”

Additionally, the divestment would prevent FTDI's technology and intellectual property from “being used to pose a risk to critical national infrastructure which uses FTDI products.”

The National Security and Investment Act was introduced after the U.K.’s largest microprocessor factory, known as the Newport Wafer Fab, was acquired in 2021 for £63 million ($76 million) by Chinese-owned Nexperia amid the global semiconductor supply shortage.

That acquisition had initially been reviewed and given the green light by the Department for Business and the National Security Advisor. But in a report titled “Sovereignty for Sale” published in April 2022, the Foreign Affairs Committee accused the government of failing to take seriously the British national interest in the ownership of the Newport Wafer Fab. 

The British government subsequently announced that it was ordering Nexperia to sell at least 86% of the acquired company. It argued that the acquisition posed a risk to national security relating to “technology and know-how that could result from a potential reintroduction of compound semiconductor activities at the Newport site, and the potential for those activities to undermine UK capabilities.”

It follows the British government’s launch of the National Protective Security Authority (NPSA), a part of MI5 — the U.K.’s domestic intelligence service — to help businesses and organizations defend themselves from “state-sponsored attempts at stealing sensitive research and information.”

In 2023, the U.K. government tightened the sale of semiconductors to China, rejecting the vast majority of license applications from companies seeking to export the technology there. In 2022, the U.S. Commerce Department implemented strict export controls to restrict China's ability to obtain "advanced" semiconductor chips and technology that could be used in miitary systems.

The Wall Street Journal reported earlier this week that several U.S. semiconductor toolmakers are cutting Chinese companies from their supply chains following pressure from Washington.