In a move that will likely cause at least a few frowns in Beijing, Bloomberg reports that President Trump blocked a Chinese-backed buyer from acquiring chipmaker Lattice Semiconductor, not only a "personal rebuke that bodes poorly for several other Chinese buyers seeking U.S. security clearance for their acquisitions", but also a symbolic escalation of the "cold" trade war with China, hinting that the Trump administration will no longer allow China to acquire advanced US intellectual property, especially when national security may be on the line.
"Consistent with the administration’s commitment to take all actions necessary to ensure the protection of U.S. national security, the president issued an order prohibiting the acquisition," Treasury Secretary Steven Mnuchin said in a statement.
Here's Trump's order blocking the sale of Lattice Semiconductor to a China-backed fund pic.twitter.com/FxX7oDihmh
— David S. Joachim (@davidjoachim) September 13, 2017
The White House said that "the national-security risks posed by the deal included the Chinese government’s role in supporting this transaction, the importance of semiconductor supply chain integrity to the United States government, and the use of Lattice products by the United States government."
Trump’s move builds on years of U.S. opposition to China’s efforts to bolster its chip industry by buying American technology. China, the world’s largest chip market, has been on the hunt for acquisitions in the field as it looks to build a domestic supply and rely less heavily on imports, as the $300 billion global semiconductor industry undergoes its biggest wave of consolidation. U.S. officials worry that China’s investment push could threaten the competitiveness of American industry and give Beijing access to cutting-edge technology with commercial and military applications.
According to Bloomberg, the deal block was just the fourth time in 27 years that a U.S. president has ordered a foreign takeover of an American firm stopped because of national-security risks.
Trump acted on the recommendation of a multi-agency panel, the White House and the Treasury Department said Wednesday. The spurned buyer, Canyon Bridge Capital Partners LLC, is a private-equity firm backed by a Chinese state-owned asset manager.
Other Chinese deals currently under review include MoneyGram International Inc.’s proposed sale to Ant Financial, the financial-services company controlled by Chinese billionaire Jack Ma. Ironically, the government is also examining an agreement by Chinese conglomerate HNA Group Co. to buy a stake in SkyBridge Capital LLC, the fund-management company founded by Anthony Scaramucci, who was briefly Trump’s White House communications director.
As Bloomberg explains, Portland, OR-based Lattice went to uncommon lengths in hopes of saving its $1.3 billion sale to Canyon Bridge, which was first announced in November. Acquisitions of U.S. companies like Lattice by overseas buyers are reviewed by the Committee on Foreign Investment in the U.S., a panel staffed by senior officials from the Treasury, State, Homeland Security and Defense departments. CFIUS can bless deals or recommend changes to address security concerns. If it doesn’t like a deal, it can recommend the president block it. Lattice and Canyon Bridge refiled three times without winning approval before making the unusual decision to appeal to Trump in hopes of winning him over with a pledge to save jobs.
The failed Lattice acquisition is at least the third Chinese deal that has collapsed this year after failing to win approval from the security panel. The others are HNA’s investment in Global Eagle Entertainment Inc., an in-flight entertainment and internet-services provider, and T.C.L. Industries Holdings’ proposed purchase of Inseego Corp.’s mobile-broadband business.
Now the question is whether China will be sufficiently angered by the decision to tacitly give North Korea the green light to lob one more ICBM in the skies over Japan...
LSCC stock moved sharply lower on the report, although it has since recovered much of its losses, as the deal collapse had been previously telegraphed, and now opens up the company for competitive bids.