Trump stops China-backed takeover of U.S. chip maker

Trump vs. China: Tensions over trade
Trump vs. China: Tensions over trade

President Trump has stopped the takeover of an American chip maker by a private equity firm with ties to China.

The deal, which would have seen China-backed Canyon Bridge Capital Partners acquire Lattice Semiconductors, was blocked over national security concerns.

"Today, 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 Wednesday.

The national security risk included "the potential transfer of intellectual property" to the Chinese-backed company and the "Chinese government's role in supporting this transaction," according to Mnuchin's statement.

Those are sensitive matters: the Trump administration launched an investigation last month into whether China is unfairly getting hold of American technology and intellectual property.

The Committee on Foreign Investment in the U.S., which reviews deals that could result in a foreign entity taking control of an American company, had previously recommended halting the deal.

Related: Tech company wants Trump to overrule national security decision on China deal

The business deal put Trump in the middle of a hot-button issue: Chinese investment in the United States.

Both Lattice and Canyon Bridge had said the acquisition could have boosted American jobs, a core issue for the Trump administration.

Lattice had said that Canyon Bridge currently employs 300 people in Oregon -- and Canyon Bridge has committed to adding 350 more if the takeover deal went through.

In a statement Wednesday, Canyon Bridge said it is "obviously disappointed" by Trump's decision and called the proposed acquisition "an excellent deal" for Lattice and for "expanding the opportunity to keep jobs in America."

Related: How China squeezes tech secrets from U.S. companies

Reps for Lattice did not immediately respond to a request for comment. Lattice stock fell nearly 2% in after hours trading following the news.

The Chinese government believes that "security inspections in sensitive industries are a legitimate right of any country," said Gao Feng, a Chinese Commerce Ministry spokesman. But he added that "they should not become a tool to promote protectionism."

Canyon Bridge says it's headquartered in California, but its website also lists a Beijing address and states, "Initial funding for Canyon Bridge comes from limited partners in China."

The takeover was pegged as a $1.3 billion deal when it was first announced in November 2016.

Chinese investment into U.S. firms so far in 2017 includes 83 deals worth about $25 billion, according to research firm Rhodium Group.

-- Serena Dong and Jethro Mullen contributed to this report.

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