A UK semiconductor factory owned by China has shut down production of crucial microchips as Beijing tightens its grip on the global electronics supply chain.

Lincoln-based Dynex Semiconductor has stopped making its high-voltage chips in Britain, company accounts have revealed.

Meanwhile, its blacklisted Chinese owner is expanding vast domestic facilities producing the same components.

The development is likely to raise fresh fears about Chinese companies hollowing out the UK’s electronics industry.

Last week, Chinese-owned tech company Nexperia was accused of transferring microchip technology from Manchester before its seizure by the Dutch government threatened a global carmaking crisis.

The row led China to block exports of Nexperia’s chips, which are crucial to the global automotive industry, threatening car production lines around the world.

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Nexperia’s Chinese owner Wingtech denied that it had transferred technology from the company’s plant in Manchester to China and was planning to shut down European operations.

Semiconductor technology has been at the frontline of a tech war between the West and China, with both sides imposing trade restrictions in a bid to put pressure on opposing economies.

Dynex, which dates back to 1957, is one of Britain’s leading producers of semiconductor devices known as IGBTs, which are used to control high-power loads in electric trains and cars.

In 2008 it was bought by CRRC, the state-owned Chinese rail corporation. CRRC was blacklisted by the US government in 2023 over alleged ties to the Chinese military.

China invested in Dynex as part of a plan to secure supplies of the high-voltage chips that are crucial to building out the country’s high-speed rail systems and grid projects.

Since buying Dynex, CRRC has invested heavily in Chinese production of the devices and Dynex said in UK accounts that it was ceasing IGBT production in Lincoln this year.

It issued a nine-month notice period to customers in October last year, suggesting production was shut down this summer. The company said it would “increase competitiveness of capabilities by utilising our global setup”.

In contrast, CRRC has become one of China’s biggest producers of IGBTs and recently opened a third production line in eastern China.

Dynex’s UK accounts said the company would continue to finish the IGBT chips, a process known as packaging, but that production would be focused in other areas.

IGBTs are capable of managing high-voltage electrical loads which makes them useful in controlling power in electric vehicles.

China relied heavily on imports of the devices before CRRC bought Dynex. The new owners initially expanded Dynex’s facilities but in 2014, the company opened a first-of-its kind IGBT factory in China and has since added two more production lines.

CRRC investor documents claim the company has “broken the monopoly of rail transit and [ultra high-voltage] devices by foreign enterprises”.

Dynex’s Chinese ownership has raised concerns that British technology has been used to supply the country’s navy with railguns.

On Monday, shares in car companies rose on hopes that China would allow some exports of Nexperia chips, most of which are made in Europe but finished in China.

Beijing said on Saturday that it would consider exemptions to its ban after a meeting between Donald Trump and Xi Jinping raised hopes for easing trade tensions.

Separately, Microsoft said it had become the first company to secure permission to export high-end Nvidia chips to the United Arab Emirates. The US has restricted sales of Nvidia chips to the Gulf state for the last two years amid fears they could make their way to China.

CRRC and Dynex were contacted for comment.

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