snapshots

Sep 14, 2017 | 23:24 GMT

2 mins read

U.S.: Why Trump Blocked a Semiconductor Company Takeover

(Stratfor)

U.S. President Donald Trump has stopped a foreign investment into a U.S. company. On Sept. 13, Trump blocked Canyon Bridge Capital Partners' proposed purchase of Lattice Semiconductor Corporation for $1.3 billion, the fourth time a U.S. president has done so. The reason? The trail of Canyon Bridge Capital Partners' financial backing leads directly to the China Reform Fund Management Co., meaning the fund has substantial backing from the Chinese state. By blocking the purchase, Trump is making clear his opposition to Chinese state-led investment in strategic sectors.

Canyon Bridge Capital Partners' attempted takeover faced intense scrutiny since it was announced in November 2016. The deal was filed three times with the Committee on Foreign Investment in the United States (CFIUS), the interagency committee that reviews potential purchases of U.S. companies by overseas entities. Canyon Bridge Capital Partners made an appeal to Trump to overrule CFIUS. Although Trump's statement explaining his decision mentioned the potential effects to the U.S. defense supply chain, it focused on China's attempt to acquire U.S. technology. Lattice technology has legitimate defense applications, but the U.S. military is not known to be one of the company's customers. By contrast, CFIUS recommended a planned takeover of German semiconductor company Aixtron — whose products are used in certain military applications — by China's Fujian Grand Chip Investment Fund LP be dropped, citing issues of national security.

We may now be seeing an expanded definition of national security from CFIUS and Trump. Under this expanded definition, it isn't just important to keep other states from gaining control over companies directly involved in military applications. Rather, it's also important to keep companies producing technologies with greater prowess than their overseas competitors out of foreign hands. By keeping China, the world's largest semiconductor market, from purchasing U.S. semiconductor companies, the United States is able to protect its place ahead of China in the chip industry.

The deal's death has implications for the future of similar deals. Other technology sector takeovers are still being reviewed, including one led by Chinese magnate-owned Ant Financial and another by Chinese conglomerate HNA Group, which has already pulled out of a deal in the United States this year. Trump's decision to block the purchase by Canyon Bridge Capital Partners casts a shadow over those deals. That shadow, as well as EU opposition to Chinese investments, could force Chinese companies to distance themselves from state backing in specific takeovers. 

Article Search

Copyright © Stratfor Enterprises, LLC. All rights reserved.

Stratfor Worldview

OUR COMMITMENT

To empower members to confidently understand and navigate a continuously changing and complex global environment.

GET THE MOBILE APPGoogle Play