Obama set to block Chinese buy of German firm Aixtron
02 Dec 2016
US President Barack Obama is poised to block a Chinese company from buying Germany's Aixtron SE, people familiar with the matter told Bloomberg, which would mark only the third time in more than a quarter century that the White House has rejected an investment by an overseas buyer as a national security risk.
Aixtron specialises in manufacturing metalorganic chemical vapour deposition equipment for clients in the semiconductor industry.
The president is expected today to uphold a recommendation by the Committee on Foreign Investment in the US (CFIUS) that the sale of the semiconductor-equipment supplier to China's Grand Chip Investment GmbH should be stopped, said the people who asked not to be identified as the details aren't public.
Blocking the €670-million ($714 million) acquisition would mark the second time Obama has rejected a deal on national security grounds. The first was in 2012 when he stopped Chinese-owned Ralls Corp from developing a wind farm near a Navy base in Oregon. Before that, in 1990 then-president George H W Bush stopped a Chinese acquisition of MAMCO Manufacturing Inc, an aircraft-parts maker.
"We're in intensive contact with the relevant authorities,'' Aixtron spokesman Guido Pickert told Bloomberg today. "We're still waiting to hear on a decision.''
CFIUS reviews purchases of US companies by foreign buyers and pays particular attention to purchases of technology, especially when it has defence applications. It has a say in the Aixtron deal because the company has a subsidiary in California and employs about 100 people in the US, where it generates about 20 per cent of its sales.
Aixtron's technology can be used to produce light-emitting diodes, lasers, transistors, solar cells, among other products, and can have military applications in satellite communications and radar. Northrop Grumman Corp, a major US defence contractor, is among its customers, according to a Bloomberg supply chain analysis.
''It will be extremely difficult for China's state owned enterprises to do deals in the semiconductor industry looking forward,'' said He Weiwen, deputy director at the Center for China and Globalization. ''It definitely posts a negative impact on China-US relations, but the damage is limited.''
The decision comes at a crucial moment for US-China relations. President-elect Donald Trump has accused China of carrying out unfair trade practices that hurt US workers. He has vowed to brand the country a currency manipulator and said he'd impose tariffs on Chinese goods.
Meanwhile, Chinese companies are investing more in the US than ever. Chinese foreign direct investment in America reached a record $15.3 billion in 2015, according to Rhodium Group.
Notable investments by Chinese companies include the purchase of Smithfield Foods Inc by WH Group Ltd in 2013 and China National Chemical Corp's bid for Syngenta AG, which CFIUS cleared in August. Dalian Wanda Group Co is expanding in Hollywood with its purchases of film producer Legendary Entertainment LLC and the second-biggest US cinema operator, AMC Entertainment Holdings Inc.
CFIUS doesn't comment on its reviews because they're confidential. National Security Council spokeswoman Emily Home declined to comment. Grand Chip didn't respond to e-mailed requests for comment, while the China phone number listed on its regulatory filings was disconnected. Faxed requests for comment to foreign and commerce ministries weren't immediately responded to.
Chinese investment in the US has drawn growing concern from Capitol Hill. Lawmakers pushed the Government Accountability Office to review whether CFIUS's scope should be expanded. Senator Chuck Schumer, a Democrat from New York, also wrote to Treasury Secretary Jacob Lew saying that he's concerned about the growing number of acquisitions of US companies by Chinese state-owned buyers. Schumer promised Congress would work on legislation to expand CFIUS's oversight.
CFIUS determined Aixtron's sale to Grand Chip Investment, announced in May, raised unresolved national security concerns and should be abandoned, Aixtron said on 18 November. Aixtron and Grand Chip rejected that position and planned to continue negotiations with the government, according to the statement.
By law, the US president has 15 days to decide on a CFIUS matter after the panel completes its investigation and must issue an executive order to block a deal. CFIUS rulings are rarely referred to the president for a decision before being resolved in some other way.
When a deal raises security risks, the companies can try to negotiate conditions to resolve government concerns, such as a requirement that only US citizens handle certain products and services. When CFIUS concerns can't be resolved the sale is often abandoned rather than going to the president for a formal rejection.
Aixtron specialises in manufacturing metalorganic chemical vapour deposition equipment for clients in the semiconductor industry.
The president is expected today to uphold a recommendation by the Committee on Foreign Investment in the US (CFIUS) that the sale of the semiconductor-equipment supplier to China's Grand Chip Investment GmbH should be stopped, said the people who asked not to be identified as the details aren't public.
Blocking the €670-million ($714 million) acquisition would mark the second time Obama has rejected a deal on national security grounds. The first was in 2012 when he stopped Chinese-owned Ralls Corp from developing a wind farm near a Navy base in Oregon. Before that, in 1990 then-president George H W Bush stopped a Chinese acquisition of MAMCO Manufacturing Inc, an aircraft-parts maker.
"We're in intensive contact with the relevant authorities,'' Aixtron spokesman Guido Pickert told Bloomberg today. "We're still waiting to hear on a decision.''
CFIUS reviews purchases of US companies by foreign buyers and pays particular attention to purchases of technology, especially when it has defence applications. It has a say in the Aixtron deal because the company has a subsidiary in California and employs about 100 people in the US, where it generates about 20 per cent of its sales.
Aixtron's technology can be used to produce light-emitting diodes, lasers, transistors, solar cells, among other products, and can have military applications in satellite communications and radar. Northrop Grumman Corp, a major US defence contractor, is among its customers, according to a Bloomberg supply chain analysis.
''It will be extremely difficult for China's state owned enterprises to do deals in the semiconductor industry looking forward,'' said He Weiwen, deputy director at the Center for China and Globalization. ''It definitely posts a negative impact on China-US relations, but the damage is limited.''
The decision comes at a crucial moment for US-China relations. President-elect Donald Trump has accused China of carrying out unfair trade practices that hurt US workers. He has vowed to brand the country a currency manipulator and said he'd impose tariffs on Chinese goods.
Meanwhile, Chinese companies are investing more in the US than ever. Chinese foreign direct investment in America reached a record $15.3 billion in 2015, according to Rhodium Group.
Notable investments by Chinese companies include the purchase of Smithfield Foods Inc by WH Group Ltd in 2013 and China National Chemical Corp's bid for Syngenta AG, which CFIUS cleared in August. Dalian Wanda Group Co is expanding in Hollywood with its purchases of film producer Legendary Entertainment LLC and the second-biggest US cinema operator, AMC Entertainment Holdings Inc.
CFIUS doesn't comment on its reviews because they're confidential. National Security Council spokeswoman Emily Home declined to comment. Grand Chip didn't respond to e-mailed requests for comment, while the China phone number listed on its regulatory filings was disconnected. Faxed requests for comment to foreign and commerce ministries weren't immediately responded to.
Chinese investment in the US has drawn growing concern from Capitol Hill. Lawmakers pushed the Government Accountability Office to review whether CFIUS's scope should be expanded. Senator Chuck Schumer, a Democrat from New York, also wrote to Treasury Secretary Jacob Lew saying that he's concerned about the growing number of acquisitions of US companies by Chinese state-owned buyers. Schumer promised Congress would work on legislation to expand CFIUS's oversight.
CFIUS determined Aixtron's sale to Grand Chip Investment, announced in May, raised unresolved national security concerns and should be abandoned, Aixtron said on 18 November. Aixtron and Grand Chip rejected that position and planned to continue negotiations with the government, according to the statement.
By law, the US president has 15 days to decide on a CFIUS matter after the panel completes its investigation and must issue an executive order to block a deal. CFIUS rulings are rarely referred to the president for a decision before being resolved in some other way.
When a deal raises security risks, the companies can try to negotiate conditions to resolve government concerns, such as a requirement that only US citizens handle certain products and services. When CFIUS concerns can't be resolved the sale is often abandoned rather than going to the president for a formal rejection.