The Chinese state had a hidden role in the acquisition of Lattice Semiconductor Corp whose chips have military applications.
In a clear signal from Washington to Beijing, U.S. President Donald Trump has blocked a Chinese-backed private equity firm’s acquisition bid for a U.S. chipmaker, thus telling Beijing in very lucid terms that the United States will not allow takeover deals from foreign buyers when it involves technologies with potential military applications.
China backed Canyon Bridge Capital Partners’ planned $1.3-billion acquisition of Lattice Semiconductor Corp, was one of the biggest attempts by China to buy into the U.S. microchip sector.
The deal did not pass U.S. regulatory scrutiny after a Reuters report that pointed out that Canyon Bridge was partially funded by capital from China’s central government and had indirect links to its space program.
Subsequently, U.S. defense officials raised concerns about this acquisition.
Portland, Oregon-based Lattice manufactures chips that are known as a field-programmable gate arrays, which allows companies to place their software code directly onto the chips. These can be used in a military scenario.
Through an executive order order U.S. President Donald Trump, ordered Lattice and Canyon Bridge to “… take all steps necessary to fully and permanently abandon the proposed transaction” within 30 days.
Trump’s decision is in sync with that of the U.S. Committee on Foreign Investment in the United States (CFIUS), which scrutinizes deals for potential national security threats.
In a statement following Trump’s decision, U.S. Treasury Secretary Steven Mnuchin said, “CFIUS and the president assess that the transaction poses a risk to the national security of the United States that cannot be resolved through mitigation.”
He went on to add, the decision to block the deal was taken after factoring in, U.S. national security risks, the role played by the Chinese government in supporting the deal, the importance of integrity in the semiconductor supply chain, the usage of Lattice products by the U.S. government.
On Wednesday, in a joint statement, Lattice and Canyon Bridge stated they had terminated the deal.
The development comes in the wake of U.S.-China relations entering a sensitive time strained by China-backed North Korea’s missile rhetoric.
The Chinese Communist Party is also preparing to hold its once-every-five-years Congress in October.
Other Chinese deals awaiting CFIUS approval include Ant Financial’s $1.2 billion acquisition bid of U.S. MoneyGram International Inc, a money transfer company, and China Oceanwide Holdings Group Co Ltd’s $2.7 billion acquisition of U.S. insurer Genworth Financial Inc.
Incidentally, Unic Capital Management’s $580-million acquisition of U.S. semiconductor testing company Xcerra Corp is also awaiting CFIUS approval.