In a rare move, President Barack Obama issued an order on Friday that halted a 670 million euro ($719 million) deal that would see China’s Grand Chip Investment taking over Aixtron SE, a German-based semiconductor equipment company. The decision was backed up by a claim that such a deal would pose a national security risk to the U.S.
How Obama is able to stop a foreign deal between Germany and China comes down to Aixtron’s U.S. subsidiary in California. While the relatively small presence in California may seem trivial, recent estimates show the division accounts for close to 20 percent of Aixtron’s sales.
It was the Committee on Foreign Investment in the U.S. (CFIUS), a group that reviews the foreign purchases of U.S. companies, that recommended the presidential block, putting the national security risk as one of the top concerns.
On Friday, Obama backup up his presidential order in a statement that read: “There is credible evidence that leads me to believe that Grand Chip Investment GmbH… through exercising control of the U.S. business of Aixtron SE… might take action that threatens to impair the national security of the United States.”
There is some credibility to the national security concern seeing that Northrop Grumman, a major U.S. defense contractor, is one of Aixtron’s customers. That is in addition to concerns over the Chinese having access to the company’s vast missile defense resources.
Aixtron has said that they plan to move forward with the deal, minus the U.S. business for the time being, but the offer will undoubtedly take a financial hit. There is also a similar investigation underway by the German government, which could put a complete end to the deal.