The facility at Newton Aycliffe in northeast England is the only secure site in Britain with the capability to produce gallium arsenide chips, used in electronic devices.
The semiconductors are used in a number of military platforms, including to boost fighter jet capabilities.
“Semiconductors are at the forefront of the technology we rely upon today, and will be crucial in securing our military’s capabilities for tomorrow,” said Defence Secretary John Healey.
“This acquisition is a clear signal that our government will back British defence production,” he added in a statement released by the Ministry of Defence (MoD).
The government has bought the factory from US company Coherent Inc and will be named Octric Semiconductors UK, the MoD said.
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The ministry did not specify how much the government had paid but a source close to the matter told AFP it was around £20 million ($27 million).The purchase will secure up to 100 jobs, according to the ministry.
The Telegraph newspaper reported in August that its future had been jeopardised by the end of a major contract with US tech giant Apple.
Italian aerospace company Leonardo was among Coherent’s customers, but did not have any outstanding orders with it, the paper added.
More than a trillion semiconductors are manufactured each year, with the global semiconductor market forecast to reach a total market size of $1 trillion by 2030, according to the UK government.
Used in smartphones, cars and weapons, semiconductors are indispensable to modern economies and have become a major source of competition between the United States and China.
They are also crucial to future technologies, such as artificial intelligence and 6G wireless networks.
