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Obama Nixes Sale of Sunnyvale Chipmaker Over Security Concerns
Posted December 6, 2016
Obama Nixes Sale of Sunnyvale Chipmaker Over Security Concerns
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By Ethan Baron. Updated December 6, 2016 10:41AM

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President Barack Obama has shot down the sale of Sunnyvale semiconductor firm Aixtron to a China-linked firm over national security concerns.

China on Monday issued an official complaint and questioned Obama's motives.

The company trying to buy Aixtron and its German parent firm Aixtron SE for $714 million is owned by Chinese investors with links to Chinese state enterprises, the U.S. Department of the Treasury said in a news release Friday. Obama and the federal inter-agency Committee on Foreign Investment in the U.S. concluded that the sale to Fujian Grand Chip would threaten America's security, the department said.

Aixtron's technology has military applications, according to the department.

Determinations about potential military uses of particular semiconductor technologies may come down to whether they can produce chips capable of ultra-high performance or which can withstand extremely severe environments, said Joel Espelien, senior analyst with TDG Research.

The U.S. president can torpedo acquisitions when there is "credible evidence that the foreign interest exercising control might take action that threatens to impair national security," according to the Treasury Department.

And while Obama's move represented a blunt-force approach to the problem of protecting America from technological threats, it's about the only tool available for policing such a fast-moving sector, Espelien said.

"Bureaucratic regulation can't do the job," Espelien said. "The technology ecosystem is too dynamic, it's too complex -- there's just no way to write generic rules that aren't hopelessly easy to circumvent.

"If you're not going to have this bureaucratic overlay over everything, which a lot of people would hate, you have to do these case-by-case interventions."

China on Monday called Obama's decision "pure market behavior," the Associated Press reported. "We hope that the United States will cease making groundless accusations about Chinese companies and will provide a fair environment and favorable conditions for investment by them," China's foreign ministry spokesman Lu Kang said at a briefing.

Aixtron and Fujian Grand Chip did not immediately respond to requests for comment.

Obama's action was only the third time in 30 years that a U.S. president has nixed an acquisition by a Chinese company over security concerns, the AP reported. Germany had approved the deal but last week stated it was reconsidering because of "security-related questions," according to the AP.

But such moves by the executive branch could become more common under the administration of President-elect Donald Trump, Espelien said. Trump last week angered China by accepting a phone call from Taiwan in violation of long-standing protocol between the U.S. and China. Trump economic adviser Stephen Moore added fuel to the fire on Monday.

"If China doesn't like it, screw 'em," Moore said on the Big John and Ray Show on WLS AM890 in Chicago.

Espelien expects an increase in adversarial exchanges between the U.S. president and China. "I don't think we've seen the last of this type of thing bubbling up."

© 2017 San Jose Mercury News syndicated under contract with NewsEdge/Acquire Media. All rights reserved.

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