China criticises US decision to block Aixtron takeover

Foreign Investment Committee finds risks posed by the purchase

BEIJING, Dec 5, (Agencies): China Monday criticised a US decision to block a Chinese company’s purchase of German semiconductor equipment maker Aixtron, saying business should not be politicised.

US President Barack Obama blocked the deal by rejecting the inclusion of Aixtron’s US unit in it.

The US Treasury Department said the Committee on Foreign Investment in the United States had found that the risks posed by the purchase, which could put sensitive technology with potential military applications in Chinese hands, were too great.

Chinese foreign ministry spokesman Lu Kang said the move to purchase Aixtron was purely market-driven.

“China opposes politicising normal business behaviour or interfering in it in a political way,” he told a regular press briefing.

“We hope the US side can stop making groundless accusations to Chinese companies and provide a fair environment and good conditions to Chinese investments.”

On Friday, Obama stopped Fujian Grand Chip Investment Fund (FGC) from buying Aixtron US, the division of the German company in California where nearly a fifth of its 713-strong workforce is based.

While the 670 million euro ($717 million) deal is small, US opposition is seen as a sign of growing concern in the West about the acquisition of new technology by Chinese players and comes after Washington blocked the sale by Philips of its US lighting business to Asian buyers.

The crux of the issue for Aixtron is that it makes devices which produce crystalline layers based on gallium nitride that are used as semiconductors in weapons systems.

The German firm’s technology is being used to upgrade both US and foreign-owned Patriot missile defence systems and the US Treasury Department said on Friday the deal had been blocked due to national security risks.

Aixtron said, however, the US order “was limited to the United States business and did not prohibit the acquisition of Aixtron shares”, indicating that a deal could be revived, albeit under revised terms.

“Chinese investors might be willing to take over Aixtron without its US business including US patents and patent applications,” DZ Bank analyst Harald Schnitzer said in a client note. “That could be possible but we doubt that GCI (FGC) would be prepared to pay 6 euros per Aixtron share in such a case.”

Aixtron shares were up 0.9 percent at 3.86 euros by 15:15 GMT well below the 6 euros per share FGC offered in May.

Aixtron’s operations in Sunnyvale, California are its third-largest site with manufacturing, sales, service and engineering as well as research and development.

In the first nine months of the year, the US operations contributed 22 million euros or about 20 percent to total sales of 107 million.

Analysts have said Aixtron has a bleak future as a stand-alone company as it struggles in an overcrowded market where Chinese companies call the shots.

Aixtron has also said it needs to cut costs and jobs if the deal falls through, while analysts said a white knight bidder such as US chip equipment maker Applied Materials could emerge.

Another obstacle is that the German Economy Ministry withdrew its approval for the Chinese acquisition in October and is conducting its own review of the transaction.

Aixtron had registered patents for 189 products at the end of 2015, according to its annual report. Of those, 97 were patent protected, with patents pending for the remaining 92.

“Patent protection for inventions is usually applied for in those sales markets relevant for Aixtron, specifically in Europe, China, Japan, South Korea, Taiwan and the United States,” the company said in the annual report.

A company spokesman declined to give a geographic breakdown of the patents.

The US decision to block the Aixtron deal angered China, with the foreign ministry calling it “political obstruction”.