Trump blocks sale of US firm to China group

US President Donald Trump blocked a Chinese-backed private equity firm from buying a US-based chipmaker, sending a clear signal to Beijing that Washington will oppose takeover deals that involve technologies with potential military applications.

White House cites national security concerns over deal to acquire American semiconductor maker Lattice

WASHINGTON • United States President Donald Trump has blocked a China-backed investor from buying an American semiconductor maker over national security concerns in a rare move that could signal more aggressive scrutiny of China's dealmaking ambitions.

The deal for Lattice Semiconductor has provided a test of the President's economic and diplomatic relationship with China.

Dr Derek M. Scissors, a resident scholar at the American Enterprise Institute who studies Chinese investment, said the administration's decision over Lattice was intended to send a political message. "We could let it die quietly," he said, "but we're going to kill it loudly."

The White House said on Wednesday that it prevented the acquisition of Lattice in part because the US government relies on the company's products. The integrity of the semiconductor industry, it said, was vital.

The White House also raised concerns over the buyer's close ties to Beijing. The investment group included China Venture Capital Fund Corp, which is owned by state-backed entities, the White House said.

China expressed concern about the decision. "We believe conducting security examinations of investments in sensitive sectors is a country's legitimate right, but it should not become a tool for advancing protectionism," Chinese Commerce Ministry spokesman Gao Feng told a press briefing yesterday.

A SECURITY RISK

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.

US TREASURY SECRETARY STEVEN MNUCHIN, in a statement following the decision.

A LEGITIMATE RIGHT

We believe conducting security examinations of investments in sensitive sectors is a country's legitimate right, but it should not become a tool for advancing protectionism.

CHINESE COMMERCE MINISTRY SPOKESMAN GAO FENG, responding to the Trump administration move.

The decision could foretell trouble for other Chinese deals under review by the Committee on Foreign Investment in the United States, a multi-agency group that examines takeovers of American companies by foreign buyers and makes recommendations to the President. The group, known as CFIUS, is also looking at the proposed purchase of MoneyGram International by Ant Financial, an affiliate of Chinese technology giant Alibaba Group.

Lattice announced an agreement last November to sell itself to a private equity firm, Canyon Bridge Capital Partners, for US$1.3 billion (S$1.76 billion). The initial funding for the company, based in Palo Alto, California, came from China.

CFIUS raised warning flags about the deal. Although the review process takes place behind closed doors, Lattice disclosed on Sept 1 that the committee planned to recommend that the President block the deal.

Lattice tried to appeal to the President. In a filing, the company said it would offer measures to resolve any outstanding national security concerns.

However, US Treasury Secretary Steven Mnuchin, the chairman of the review committee, said in a statement on Wednesday that its recommendation was "consistent with the administration's commitment to take all actions necessary to protect national security".

Meanwhile, the Trump administration on Wednesday also told US government agencies to remove Kaspersky Lab products from their networks, saying it was concerned the Moscow-based cyber security firm was vulnerable to Kremlin influence and that using its anti-virus software could jeopardise national security.

In response, the Russian embassy in the US said the decision was "regrettable", adding that it delays the prospects of a restoration of bilateral ties.

NYTIMES, REUTERS

A version of this article appeared in the print edition of The Straits Times on September 15, 2017, with the headline 'Trump blocks sale of US firm to China group'. Print Edition | Subscribe