China economy

US lawmakers call for block on Chinese takeover of semiconductor maker over security concerns

PUBLISHED : Tuesday, 06 December, 2016, 3:01pm
UPDATED : Tuesday, 06 December, 2016, 3:01pm

More than 20 members of the US Congress have written to US Treasury Secretary Jack Lew asking for the acquisition of US chip maker Lattice Semiconductor by a fund with ties to China’s government to be blocked over security concerns.

The letter sent on Monday follows a Reuters report last week that revealed that Canyon Bridge Capital Partners, the buyout fund that agreed to acquire Lattice for US$1.3 billion, is funded partly by cash originating from China’s central government and has indirect links to its space programme.

In their letter, the 22 lawmakers wrote that the deal could disrupt the US military supply chain and possibly lead to a reliance on foreign-sourced technologies for many critical US Defence Department programmes.

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They also pointed to a warning last month by US Secretary of Commerce Penny Pritzker that the US would not accept China’s “US$150 billion industrial policy designed to appropriate this industry”.

The lawmakers’ letter said: “Anything other than a rejection of the acquisition of Lattice by this People’s Republic of China-front entity would seem to undermine Secretary Pritzker’s public commitment.”

The members of Congress, Republican and Democrat, wrote to Lew in his capacity as chairman of the Committee on Foreign Investment in the United States (CFIUS), a government panel that scrutinises the acquisitions of companies by foreign firms on national security grounds.

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Representatives for CFIUS and Canyon Bridge did not immediately respond to requests for comment. Lattice declined to comment.

Lattice, based in Oregon, makes programmable chips known as “field programmable gate arrays” that allow companies to put their own software on silicon chips for different uses. It does not sell chips to the US military, but its two biggest rivals – Xilinx and Intel’s Altera – make chips that are used in military technology.

China has been working to develop its space programme for military, commercial and scientific purposes. As a result, the US has been wary of Beijing’s motives in semiconductor deals, and this scepticism is expected to grow after US President-elect Donald Trump, who has already taunted China on issues ranging from trade to relations with Taiwan, is inaugurated next month.

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In their letter, the lawmakers called on CFIUS to act as decisively as it did in the case of German semiconductor equipment maker Aixtron.

Last week, US President Barack Obama upheld a recommendation by CFIUS to block Aixtron’s US$717 million sale to Fujian Grand Chip Investment Fund over national security concerns.