On December 8, President Obama blocked Fujian Grand Chip Investment Fund’s attempted takeover of Germany’s computer chip manufacturing equipment company, Aixtron (which has an array of business interests in the United States). The $723 million takeover attempt was originally announced in May, with the German government voicing its own disapproval of the deal in October. Aixtron produces semiconductor devices that are used in a number of weapons systems, including in the U.S. Patriot missile system.
Chinese merger and acquisition activity has been under increased scrutiny over the past year, especially in the semiconductor industry where China is looking to acquire top of the line technology and manufacturing practices. While Chinese companies accounted for some $145 billion of demand in microchips last year, its domestic output was only one tenth of that. Since the start of 2015, Chinese companies have aggressively sought to acquire majority and/or strategic stakes in at least 13 semiconductor companies globally, seven of which were successful. The role of these companies in key industries as well as their defense applications has led to some increased scrutiny of these efforts.
The risk profile of these and, indeed, a much broader set of Chinese state-owned enterprise transactions was emphasized earlier this month by the U.S.-China Economic and Security Review Commission, which recommended that all Chinese state-owned enterprise acquisitions in the U.S. be stopped. They offered that “there is an inherently high risk that whenever an SOE acquires or gains effective control of a U.S. company.”