China slams M&A block
Protectionism stops investor from buying US tech firm
China on Thursday criticized US President Donald Trump’s decision to block a planned acquisition of a US semiconductor company by a Chinesebacked investment fund, urging the US not to use national security as a protectionist tool in reviewing mergers and acquisitions in sensitive sectors, and to treat Chinese firms fairly.
Trump’s rare move to use presidential power to prevent the purchase of Lattice Semiconductor by a Chinese investor will have a very limited impact on China’s development of the semiconductor industry but could slow down M&As in the US by Chinese firms, which in turn, could hurt US firms and its economy, experts added.
Citing national security concerns, Trump on Wednesday blocked Canyon Bridge Capital Partners LLC’s $1.3 billion bid to acquire the US semiconductor company. That’s only the fourth time a US president has banned a merger in over a quarter of a century, according to US media.
The decision has drawn concerns from Beijing, where a Ministry of Commerce (MOFCOM) spokesperson told a press conference on Thursday that while it is a country’s legitimate right to conduct national
security reviews of investments in sensitive sectors, “it should not be a protectionist tool.”
MOFCOM spokesperson Gao Feng further urged “relevant countries to treat Chinese companies’ overseas M&As objectively and fairly, and to create a reasonable and transparent operating environment for them.”
Experts said Trump’s move was in line with the US’ increasingly tougher stand against China aimed at stopping the latter from acquiring technologies in the semiconductor and other advanced technologies, but that its impact is very limited.
“If the US thinks it can stop the progress of the Chinese semiconductor sector by blocking these deals, they’ve got it wrong,” Xiang Ligang, chief executive of domestic telecom industry portal cctime.com, told the Global Times.
Xiang said that the US and other countries have long tried to block China from acquiring these technologies, yet China’s domestic industry has been rising rapidly. He identified several of the sector’s rising stars, including Huawei and ZTE.
“We might be lagging behind the US, but it’s not like we don’t have these technologies. We have hundreds of companies and billions of dollars in State funds to support them,” Xiang said.
In 2016 alone, the number of Chinese companies in the semiconductor and other related areas grew to about 1,200 from 700 the previous year, according to Liu Kun, vice president of CCID Consulting’s IC Industry Research Center in Beijing.
“The US can block the takeover of its companies, but there are so many other ways China can improve its technologies,” Liu told the Global Times.
One such way is to attract foreign or Chinese talent with a foreign educational background. He said the majority of these companies have at least a few people who have returned from working in Silicon Valley or other areas.
Chilling effect
Not only will the move not stop China but it could isolate US companies and industries from engaging with the world’s largest market, said Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation.
“The US is still the dominant player in semiconductors, but the number of market players has grown. Frankly, it is the US that needs the Chinese market and capital to rejuvenate its industry, not the other way around,” Bai told the Global Times.
Trump’s move also affects deals in other areas, as it creates a chilling effect on future M&As, Bai said.
“The bottom line is that these US companies agreed to be taken over by Chinese firms, because the bids are attractive and the long-term prospects are good for them. If you stop those, the US firms are hurt. That’s very unwise,” he said.