A Chinese company’s pending purchase of German chip equipment maker Aixtron SE was blocked by President Obama on the basis of national security concerns Dec. 2. The move underscores growing sentiments of increased scrutiny on Chinese investments in the West.
The presidential order effectively barred the acquisition of Aixtron and its U.S. subsidiaries by Fujian Grand Chip Fund. Aixtron was notified by the Committee on Foreign Investment in the U.S. (CFIUS) earlier that it would advise the president against approval of the merger.
The decision wasn’t unexpected. In late October, the German government withdrew its prior support for the €670 million ($714 million) Aixtron-Fujian tie-up on “previously unknown security-related information.”
While CFIUS never discloses reasons for blocking cross-border deals, the decision is said to be driven by production techniques of a compound called gallium nitride, sources told Reuters. The little-known material—which Aixtron’s technology helps produce—is used in production of military equipment such as radar, antennae, and lasers. It suffices to say that the U.S. government isn’t keen on Beijing obtaining the military-grade technology.
Increased Inquiry
The Aixtron decision reflects growing sentiments in the U.S. and Europe against Chinese investments in general as the world’s No. 2 economy has overtaken the United States as the world’s biggest asset acquirer.
Sigmar Gabriel, Germany’s economics minister, has signed off on legislation to limit foreign acquisitions of EU companies involving “key technologies that are of particular importance.” German concerns over Chinese investments increased after Chinese appliance manufacturer Midea purchased German robotics and engineering firm Kuka earlier this year for €4.5 billion ($5.0 billion). Kuka is a key supplier to many German and U.S. industrial firms and defense contractors.
The United States is also ramping up review of cross-border deals. CFIUS earlier this year blocked a buyout of Lumileds, a lighting company under Dutch technology giant Philips NV, by Go Scale, a Chinese private-equity firm. In February, China Tsinghua Unigroup abandoned a proposed deal to purchase digital storage manufacturer Western Digital Corp. also due to impending CFIUS investigation.
