President Trump blocked a Chinese firm from buying a U.S. computer chip maker Wednesday, demonstrating to Beijing that he will oppose acquisition of technology with potential military applications.
The decision derailed a planned $1.3 billion deal for Chinese-backed venture capitalists, including Canyon Bridge Fund, to buy Lattice Semiconductor Corporation in Portland, Oregon.
It was the latest in a series of Mr. Trump’s get-tough trade moves against China, following investigations into the communist country’s dumping products in the U.S. and stealing American technology and intellectual property.
This time he opted for a rarely used power to block foreign business deals under the Defense Production Act. It authorizes the president to to suspend or prohibit certain acquisitions that result in foreign control of a U.S. business when there is credible evidence it could pose a threat to national security.
“The national-security risk posed by the transaction relates to, among other things, the potential transfer of intellectual property to the foreign acquirer, 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,” the White House said in a statement.
The Chinese Embassy in Washington did not immediately respond when asked about the decision.
Canyon Bridge said in a statement that the deal would have helped keep jobs in the U.S.
“We are obviously disappointed in today’s decision by the President of the United States to forgo what we believe to be an excellent deal for Lattice’s shareholders and its employees by expanding the opportunity to keep jobs in America,” it said. “Canyon Bridge is committed to providing equity and growth capital to ensure the long-term success of the companies we invest in.”
Although the power is rarely used, it always forces a president to balance the America’s value for an open economy against national security interests. For Mr. Trump, however, it appeared to be an easy call.
Lattice manufactures semiconductors for the consumer, communications, and industrial markets. Its primary semiconductor product lines are programmable logic devices, which are general purpose semiconductors that customers can program to provide functionality similar to chips that are designed and produced for specific applications.
The chips have military and aerospace applications. Lattice no longer sells chips to the U.S. military, but its biggest rivals do.
The Committee on Foreign Investment in the United States (CFIUS), an interagency body chaired by the Treasury secretary that oversees business deals with security implications, backed Mr. Trump’s decision.
CIFUS ruled against the deal earlier this month.
Treasury Secretary Steven Mnuchin said the president acted “consistent with the administration’s commitment to take all actions necessary to ensure the protection of U.S. national security.”
John Schaus, a scholar at the Center for Strategic and International Studies, wasn’t surprise by Mr Trump’s decision. He said it was the perfect situation in which to apply the narrowly defined power.
“It’s sensitive national security technology,” he said. “I think CFIUS was right to give it careful scrutiny.”
CFIUS has been around since the Ford administration, but presidents only used it to block deals on three previous occasions: once under George Bush and twice under Barack Obama.
Mr. Bush also resisted using the power. That got him into a political tangle over a deal in which Dubai Ports World, a state-owned company in the United Arab Emirates, would have taken control of six major U.S. ports.
Despite concerns about exposing U.S. ports to terrorism threats and fierce opposition form Republican lawmakers, Mr. Bush vociferously defended the deal. He said blocking it sent the wrong message to allies.
Due to the controversy, Dubai Ports World eventually backed out on its own.
In an earlier case, Mr. Bush used the power in 1990 to force a Chinese firm to divest from U.S. aerospace manufacturer MAMCO.
Mr. Obama used it last year to block a German company with a Chinese partner company from buying a U.S. semiconductor company. He also used it in 2012 to stop a company owned by two Chinese nationals from being a wind power company near a U.S. Navy base.