U.S. President Donald Trump has blocked a Chinese-backed investor from buying American chip maker Lattice Semiconductor Corp., only the fourth time in a quarter century that a U.S.president has banned a foreign takeover of an American firm on national security grounds.
The action could put in question a number of other pending Chinese acquisitions in the U.S., as the likelihood of government scrutiny of such deals has increased significantly. Ant Financial’s proposed acquisition of MoneyGram International Inc. and Chinese conglomerate HNA Group Co.’s plan to buy a stake in SkyBridge Capital LLC are both currently under review by the Committee on Foreign Investment in the U.S. (CFIUS).
"The national-security risk posed by the transaction relates to, among other things, the potential transfer of intellectual property to the foreign acquirer, the Chinese government’s role in supporting this transaction, the importance of semiconductor supply chain integrity to the United States Government, and the use of Lattice products by the United States Government," were cited as reasons for blocking the deal in a statement issued by the White House yesterday.
President Trump made the decision under section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment and National Security Act of 2007. The U.S. government is strengthening the role of the Committee on Foreign Investment in the United States, with foreign investments in artificial intelligence and machine learning facing some of the closest scrutiny.
Speaking to media today in Beijing, China’s Ministry of Commerce spokesman Gao Feng said China is concerned over the matter and that the U.S. should create a fair and transparent business environment. "Conducting security checks on a sensitive investment is a nation’s legitimate right, but it shouldn’t be used as a protectionist tool,” Gao said.
Lattice Semiconductor makes programmable logic chips, which have a wide range of uses in communications, computing, industrial and military applications. The company generates more than 70% of its revenue in Asia, according to data compiled by Bloomberg.
China, the world’s largest chip maker, has been investing aggressively to bolster its chip industry, partly through the acquisition of western technology firms. In April, an investor consortium led by Chinese private equity firm Beijing Shanhai Capital Management Co., Ltd. completed a US$500 million acquisition of Analogix Semiconductor, Inc., a Santa Clara, California-headquartered maker of chips for portable devices such as smartphones, cards and displays. In 2014, China established a National Integrated Circuit Industry Investment Fund with RMB140 billion (US$21 billion) to invest in semiconductors and chip making companies.
Canyon Bridge Capital Partners LLC, a private-equity firm backed by state-owned China Reform Fund Management, had proposed to acquire NASDAQ-listed Lattice Semiconductor for approximately US$1.3 billion last November. Lattice Semiconductor issued a statement yesterday announcing termination the acquisition by Canyon Bridge, and saying it will continue to focus on initiatives that contribute to its long-term success.