U.S. President Donald Trump has blocked a deal between a Chinese equity firm and an American semiconductor company.
The move comes as trade frictions increase between the world’s two largest economies and as both countries work together to resolve the nuclear crisis on the Korean peninsula.
This is the first time President Trump has blocked the purchase of a U.S. company by a Chinese company, and it is an incredibly rare for presidents to take this step. Barack Obama did it only twice during his eight years in office.
In this case the Committee on Foreign Direct Investment in the United States (CFIUS) had already recommended that Trump reject the $1.3 billion deal.
CFIUS reviews mergers and acquisitions of U.S. companies when there are national security concerns.
The White House said the U.S. government uses programmable chips made by the semiconductor company called Lattice — and that the purchase endangers U.S. intellectual property and the nation’s semiconductor supply chain.
In a memo, released Wednesday afternoon, President Donald Trump wrote: “China Venture Capital Fund Corporation Limited…might take action that threatens to impair the national security of the United States.”
The Wall Street Journal interviewed Darin G. Billerbeck, President and CEO of Lattice Semiconductor Corp. earlier this week.
Of CFIUS’s reservations about the deal, he said: “You’re basically saying that the government itself can’t control IP (intellectual property) that they’re in charge of. I don’t understand that. It has to be — it has to be — that they don’t want to do a deal with China.”
In December, Congressman Robert Pittenger (NC-R) launched a bipartisan effort urging the Committee on Foreign Investment in the United States (CFIUS) to block the transaction.
“We are not opposed to all Chinese investments, but we must be aware of the Chinese government’s strategic, systematic effort to infiltrate key American infrastructure through what appear to be benign business transactions,” said Congressman Pittenger. “Granting China direct access to key military technology, the U.S. financial system, and other soft-power targets is simply unwise. The global economy creates new national security risks not faced by previous generations.”
Chinese Companies Fight Back
Two years ago, Chinese company – SANY – won a lawsuit against the U.S. government for being similary rejected. At the time SANY’s attorney told CGTN that he believes his case will set a precedent for other foreign companies to follow if they are similarly rejected.
“I suspect in the future if some companies, foreign companies feel their rights infringed by the process, they can follow the road-map, laid down by this case,” Tim Xia, SANY attorney said in November 2015.
There are several deals hanging in the balance which could be similarly rejected.
But CFIUS attorney Stephen Heifetz said that the administration is not saying we are closed off to Chinese investment. The U.S. government has cleared some Chinese cases.
CGTN has reached out to the Chinese Embassy for a response.