One of Britain’s largest microchip plants is facing potential closure after Apple pulled the plug on a lucrative supply deal.
Accounts filed by the US semiconductor company Coherent,
which owns a 310,000 sq ft facility in County Durham, revealed that the loss of
its main customer had put the factory’s future in jeopardy.
The Sunday Telegraph understands that the plant manufactures
components for Apple that feature in the iPhone’s Face ID recognition system,
but that the US giant has ceased orders due to upcoming changes to the next
version of the iPhone.
Coherent’s UK subsidiary said that the business was in doubt
and undergoing a strategic review that could lead to the plant being sold. It
said it had issued a last-time-buy notice to other customers.
“Unfortunately the supply to the primary customer ceased at
the end of Financial Year 2023,” it said. “This places the ongoing viability of
the business in doubt. A strategic review of the business is currently being
undertaken with potential new technologies and/or sale of the business as
options under consideration.”
The facility laid off more than 100 staff a year ago after
Apple informed the company it planned to cease orders. The remaining 257 staff
have been kept on to see through the remaining contracts.
Closure would mark the latest blow to Britain’s
semiconductor industry, which has dwindled in recent years as global production
moves to Asia.
The Coherent facility in Newton Aycliffe was originally
built by Fujitsu and described as the world’s most advanced microelectronics
plant when it was opened by Queen Elizabeth in 1991.
But the Japanese company announced plans to close the plant
in 1998 amid an electronics industry slump. It has since cycled through a
succession of owners including a microchip firm backed by Roman Abramovich
before it was sold to II-VI, a US company that later merged with Coherent.
In 2021, the company announced a major expansion of the
site, which is believed to have been related to winning the Apple contract.
Accounts for the year to June 2023 showed that the UK factory’s revenues rose
from £13.3m to £104.5m as the supply agreement came into force.
The iPhone’s Face ID system features an array of sensors and
cameras used to unlock the phone and authenticate payments, as well as produce
more accurate photos and augmented reality effects.
Apple is expected to overhaul the system in the next
generation of device, which is released later this year. Reports have claimed
that it will feature a much smaller module buried under the screen.
Losing a contract from Apple can often be disastrous for the
company’s suppliers. The British semiconductor company Imagination Technologies
lost half of its value and was eventually sold after Apple said it no longer
planned to use the company’s graphics chip designs in 2017. Other companies
including Volex and Wolfson Microelectronics suffered share price plunges after
losing contracts.
The Government announced a £1bn semiconductor strategy last
year but critics say the money is not supporting the industry and pales in
comparison to semiconductor subsidies in the US and Europe.
Apple did not comment, while Coherent did not respond to requests for comment.