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Trump blocks sale of semiconductor firm to China, citing security threat

On September 13, 2017, American President Donald Trump blocked the US$1.3 billion acquisition of Lattice Semiconductor Corp. by Canyon Bridge Capital Partners, private equity firm based in California that is backed by several investors, including China Venture Capital Fund Corporation Limited, a Chinese subsidiary of a state-owned enterprise. Lattice produces microchips, and in the past, has provided the American military with field-programmable gate arrays, which are microchips that individuals may reprogram with their own software. Because the sale was backed, in part, by funds from the Chinese Central government, President Trump obstructed the acquisition on the grounds that the sale represented a national security breach. Lattice claims the company no longer supplies chips to the American military.

After a month-long review, it was determined that Canyon Bridge had ties to the Chinese space program, and that the transfer of American microchip technology represented a national security risk, as well as a risk to American intellectual property. In a prepared statement, American Treasury Secretary Mnuchin stated that “CFIUS [Committee on Foreign Investment in the United States] and the President assess that the transaction poses a risk to the national security of the United States that cannot be resolved through mitigation.” In response, Chinese Commerce Ministry spokesperson Gao Feng affirmed America’s right to scrutinize sensitive acquisitions, but warned that security review should not be used as a tool of protectionism. The blocked acquisition of Lattice is only the fourth time in 27 years to ever be barred directly by the President: most recently, President Obama blocked the sale of the American arm of Aixtron SE to Fujian Grand Chip Investment Fund LP in December of 2016. All four blocked deals were in response to acquisitions by Chinese firms.

President Trump’s actions are consistent with his increasingly harsh rhetoric towards the Chinese government. The same day as the acquisition was blocked, President Trump tweeted that business taxes in the United States should be reduced by over 20% to match business taxes in China in order to prevent Chinese firms from undercutting American corporations. President Trump has also repeatedly suggested that the U.S. may cease trade with China if President Xi Jinping does not cooperate with UN sanctions on North Korea. Similarly, the day before the blocked sale, former Chief Strategist Steve Bannon accused Chinese companies of stealing patented technology from American companies, and suggested that the only way for China to avoid a trade war with the United States is if Beijing stops ‘appropriating American technology’. Given Bannon’s statement, President Trump’s actions could indicate that the former strategist, who views China as a threat to American interests, still has sway within the White House.

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