WASHINGTON • United States President Barack Obama has moved to block a Chinese company's purchase of German semiconductor equipment-maker Aixtron by rejecting the inclusion of Aixtron's US business in the deal.
The US Treasury Department said a review by the Committee on Foreign Investment in the United States (CFIUS) - chaired by Mr Obama - found that the risks posed by the deal were too great as it could place sensitive technology with potential military applications in Chinese hands.
"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," the Treasury said in a statement.
It added that publicly traded Aixtron's expertise in technology for making advanced compound semiconductors - used for LED lighting, lasers and solar cells - also has military applications.
Washington does not want to see such technology end up in the hands of the Chinese government-backed firm Grand Chip Investment, which wants to buy Aixtron. The Treasury statement on Friday said the CFIUS panel was not opposed to foreign investment and was focused on only national security issues.
In October, the German government withdrew its initial approval for the €670 million (S$1 billion) takeover after the US raised concerns. Citing German intelligence sources, Handelsblatt daily reported that the US had expressed fears China could use Aixtron technology to bolster its nuclear programme.
After receiving the information, the German government said on Oct 24 that it planned to take another look at the deal.
The US Treasury on Friday said Grand Chip is a German firm expressly set up for the deal and is "ultimately owned by investors in China, some of whom have Chinese government ownership".
It added that the deal would be financed by a unit of China IC Industry Investment Fund, a Chinese government-supported industrial investment fund designed to support China's integrated circuit industry.
The Treasury statement did not say what military application of the German company's technology US officials were concerned about.
Aixtron's specialty is a technology for depositing thin layers of atoms on semiconductor wafers that are used in electronic devices and systems that produce, control and convert light. It is popularly used in making solar cells.
Chinese Foreign Ministry spokesman Geng Shuang on Friday warned against any interference in the deal. "This acquisition... is a normal business activity," he said.
There was no immediate reaction from Aixtron or Grand Chip.