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Asia Connect
Trump blocks takeover of US semiconductor manufacturer by Chinese firms
White House cites national security and transfer of intellectual property to foreign acquirer
Michael Marray 1 Oct 2017

President Donald Trump has blocked a China-backed private equity investor from buying US semiconductor manufacturer Lattice Semiconductor for US$1.3 billion.

The high-profile announcement came from the White House, in addition to the usual announcement from the Committee on Foreign Investment in the United States (CFIUS). It is viewed by some analysts as a strong signal to China that President Trump intends to get tough on trade issues, as well as create some leverage on global security problems such as North Korea.

CFIUS is an inter-agency committee whose purpose is to review transactions that could result in the control of a US business by a foreign person, in order to determine the effect of such transactions on the national security of the United States.

The White House said that it had blocked the Lattice Semiconductor deal in part because the United States government relies on the company’s products. But it also specifically raised concerns over the buyer’s close ties to Beijing. The investment group included China Venture Capital Fund Corporation, which is owned by state-backed entities. Though the deal was being done via the California-based private equity firm Canyon Bridge Capital Partners, it is backed by Chinese entities.

Steven Mnuchin, secretary of the Treasury, who acts as the chair of CFIUS, issued a statement about the President's decision regarding Lattice:

“Today, consistent with the Administration's commitment to take all actions necessary to ensure the protection of US national security, the president issued an order prohibiting the acquisition of Lattice Semiconductor Corporation (Lattice) by Canyon Bridge Fund I, LP (CBFI); CBFI's subsidiaries; CBFI's limited partner, Yitai Capital Limited (Yitai); and Yitai's parent company, China Venture Capital Fund Corporation Limited (CVCF),” he wrote. The order directs the Purchasers and Lattice to take all steps necessary to fully and permanently abandon the proposed acquisition of Lattice not later than 30 days after the date of the order.

The statement noted that CVCF is a Chinese corporation owned by Chinese state-owned entities that manages industrial investments and venture capital. Lattice is a publicly traded company headquartered in Oregon that manufactures semiconductors for the consumer, communications, and industrial markets. Lattice's primary semiconductor product lines are programmable logic devices, which are general purpose semiconductors that customers can program to provide functionality similar to chips that are designed and produced for specific applications.

Mnuchin added that CFIUS and the president assessed that the transaction poses a risk to the national security of the United States that cannot be resolved through mitigation. The national security risk posed by the transaction relates to, among other things, the potential transfer of intellectual property to the foreign acquirer, the Chinese government's role in supporting this transaction, the importance of semiconductor supply chain integrity to the US government, and the use of Lattice products by the US government.

Reacting to the decision, Gao Feng, a spokesman for China’s Ministry of Commerce, said that countries should not use security reviews as a protectionist tool.

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