Germany blocks chip factory sale to China over security fears

CNN Business

The German government has blocked the sale of one of its semiconductor factories to a Chinese-owned technology company over security concerns.

The German economy ministry said in a statement that it had banned Elmos Semiconductor. which makes chips for the automotive industry, since the sale of its factory Dortmund to Silex, a Swedish subsidiary of China Sai Microelectronics.

The decision had been taken “because the acquisition would have endangered public order and security in Germany,” the ministry said in a statement.

Silex announced in December that it had signed an agreement with Elmos to buy the factory for 85 million euros ($85.4 million).

Silex did not immediately respond to CNN Business’ request for comment. Elmos said in a statement that both companies regretted the government’s decision.

“The transfer of new micromechanics technology … from Sweden and the significant investments at the Dortmund location would have strengthened semiconductor production in Germany,” Elmos said, adding that he was considering whether to take legal action.

Sia Microelectronics said in a statement Thursday that it “deeply regretted” the German government’s decision. Its shares fell more than 9% in Shenzhen.

“We have to look closely at takeovers of companies when there is important infrastructure or when there is a risk of technology flowing to buyers from non-EU countries,” German Economy Minister Robert Habeck said in a Press conference.

He added that the semiconductor industry in Europe, in particular, needed to protect its “technological and economic sovereignty”.

The planned deal had raised concerns among German authorities that Chinese investment in its critical infrastructure could compromise its intellectual property and leave it exposed to political pressure from Beijing.

Similar concerns prompted the German government to intervene in Chinese shipping giant Cosco’s plans to buy a 35% stake in the operator of a Hamburg port terminal last month.

Officials capped the planned investment in Hamburger Hafen und Logistik at 24.9%. Several government ministers, including Habeck, have pushed for the deal to be blocked entirely.

The tensions have come at a difficult time for the German economy, which is entering a recession triggered by the Russian energy crisis. German manufacturers and exporters are eager to maintain their close relationship with China.

Just last week, Chancellor Olaf Scholz met with Chinese leader Xi Jinping in the first visit by a G7 leader to Beijing in roughly three years, a trip designed to strengthen export markets such as ties Germany with Russia, once its main supplier of natural gas. continue to peel.

A delegation of top industry CEOs, including the heads of Volkswagen ( VLKAF ), Siemens ( SIEGY ) and chemical giant BASF ( BASFY ), traveled with Scholz to Beijing to meet with Chinese business executives.

But Habeck sounded a note of caution Wednesday. Addressing the blocked chip deal, he stressed that “Germany is and will remain an open investment location” but that he was not “naive”.

The visit came just a month after the United States introduced tight controls on chip exports to China, a move designed to protect its national security and bolster its domestic semiconductor industry.

In early October, the Biden administration banned Chinese companies from buying advanced chips and chip-making equipment without a license.

The rules threaten to deal a major blow to China’s ambitions to become a tech superpower, banning not only exports of chips made anywhere in the world using American technology, but also the export of the tools used to make them.

Laura Contributed to reporting.

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