China plea after Trump rejects chip deal
P resident
Donald Trump’s rejection of a China-led takeover of a US chipmaker on national security grounds cast a cloud over other Chinese deals seeking federal clearance and spurred a call for fairness from Beijing.
It was just the fourth time in a quarter century that a US president has ordered a foreign sale of an American firm stopped for security reasons. Lattice Semiconductor Corp’s spurned buyer was Canyon Bridge Capital Partners LLC, a private-equity firm backed by a Chinese state-owned asset manager.
Trump’s order blocking the deal builds on years of US opposition to China’s efforts to bolster its chip industry by buying US technology. It also extended his administration’s broader resistance to China-backed purchases, even as it seeks China’s help to resolve the North Korean nuclear crisis.
Other deals under review i nclude MoneyGram International Inc’s proposed sale to Ant Financial, the financial-services company controlled by Chinese billionaire Jack Ma. The US is also examining an agreement by Chinese conglomerate HNA Group Co to buy a stake in SkyBridge Capital LLC, the fund-management firm founded by Anthony Scaramucci, briefly Trump’s White House communications director.
“Conducting security checks on a sensitive investment is a nation’s legitimate right, but it shouldn’t be used as a protectionist tool,” Chinese Ministry of Commerce spokesman Gao Feng said in Beijing. The acquisition of Lattice is a corporate decision that the US should evaluate objectively, and the administration needs to create more transparency, he said.
Canyon Bridge said in a statement it was disappointed with the decision and would stay focused on other investment opportunities. Lattice said the acquisition was being terminated after the president’s order.
“The transaction with Canyon Bridge was in the best interests of our shareholders, our customers, our employees and the United States,” Lattice chief executive Darin G Billerbeck said. “We will continue to focus on initiatives that will contribute to Lattice’s long-term success.”
Billerbeck came to Washington two weeks ago to make a last-ditch effort to persuade government officials to support the deal, Bloomberg News reported. Lattice and Canyon Bridge had proposed measures they said would address US concerns while allowing the deal to proceed, according to that report.
Trump’s decision is a discouraging sign for companies under CFIUS review that may have tried to win approval by appealing to the president’s pledge to protect US jobs, said Shawn Cooley, a lawyer at Freshfields Bruckhaus Deringer LLP in Washington who works on cross-border transactions.
“That doesn’t seem to be much of a viable path,” he said. “There has been a lot of uncertainty about how Trump would interact with CFIUS and potentially change or expand CFIUS’s limited focus on national security. This seems to be an affirmation that Trump has no intention of changing that focus.”
Lattice makes programmable logic chips, which have a wide variety of uses because their attributes can be changed using software. The chips are used in communications, computing, and in industrial and military applications. The company generates more than 70 percent of its revenue in Asia, according to data compiled by Bloomberg.
China, the world’s largest chip market, has been on the hunt for acquisitions in the field as it looks to build a domestic supply and rely less on imports, as the $300 billion global semiconductor industry undergoes its biggest wave of consolidation. US officials worry that China’s investment push could threaten the competitiveness of US industry and give Beijing access to cutting-edge technology with commercial and military applications.
The national-security risks posed by the deal included “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,” the White House said.