UK Government’s Surprise Purchase of Durham Fab

The UK government has made a significant move in the semiconductor industry by purchasing a compound semiconductor fab in Newton Aycliffe, which will now be known as Octric Semiconductors UK. The deal, valued at £27 million ($30 million), marks a notable shift in the current semiconductor strategy.

The 310,000 square feet facility, situated in Aycliffe Business Park, was previously owned by II‑VI (now Coherent) since 2017 and was under review for potential closure. The acquisition aims to secure the supply chain for compound semiconductors, particularly those used in military applications.

Despite the change in ownership, the fab will continue its operations under the new name Octric Semiconductors UK, with the existing management team in place. Efforts are already underway to establish robust governance practices to ensure proper financial oversight, a new aspect introduced by the government's involvement.

UK Defence Secretary John Healey recently visited the site, emphasizing its importance as the sole secure facility in the UK capable of manufacturing gallium arsenide (GaN) compound semiconductors. The security of GaN production played a crucial role in the recent sale of Newport Wafer Fab in Wales from Chinese-owned Nexperia to US company Vishay.

In addition to securing the supply chain, the acquisition is expected to enhance the UK's defence industrial capacity and boost exports. The government plans to make further investments in Octric Semiconductors UK in the coming years to support growth and innovation in the sector.

Defence Secretary John Healey expressed the government's commitment to backing British defence production, safeguarding jobs in the North East, and strengthening national security through strategic investments. The facility will be equipped to produce advanced semiconductors, including gallium arsenide, to meet the evolving technological demands.

Coherent's CEO, Jim Anderson, highlighted the decision to divest the Newton Aycliffe plant as part of the company's strategy to optimize operations and focus on areas with long-term growth potential. The move aligns with Coherent's goal of enhancing profitability and efficiency.

The announcement of the acquisition precedes the upcoming Investment Summit, where the UK government aims to forge new partnerships and create a business-friendly environment to support innovation and job creation. Macquarie Semiconductor and Technology played a key role as a transaction consultant to Coherent in the deal.