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December 6, 2016

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China slams US over Aixtron takeover row

CHINA yesterday urged the United States to stop making groundless accusations against Chinese companies and politicizing normal acquisition cases.

Foreign ministry spokesman Lu Kang made the remarks in response to US President Barack Obama’s block of a Chinese company’s purchase of Aixtron US, the German chip equipment maker’s division in California where nearly a fifth of its 713 workforce is based.

Obama issued an order directing China’s Fujian Grand Chip Investment Fund to “fully and permanently abandon” the proposed acquisition of Aixtron’s US business, the US Department of Treasury said in a statement on Friday.

The Committee on Foreign Investment in the US, which reviews foreign purchases of US companies, and Obama assess that “the transaction poses a risk to the national security of the United States that cannot be resolved through mitigation,” the statement said.

Lu told a regular press briefing yesterday: “The Chinese company’s acquisition is purely market behavior.”

China is opposed to politicization of and political intervention in normal acquisitions, he said.

Lu urged the US to offer a fair environment and convenience for investment by Chinese companies.

The Chinese government always encourages Chinese companies to carry out overseas investment and cooperation in accordance with market and international rules as well as local laws, he added.

Aixtron said, however, the US order “was limited to the US business and did not prohibit the acquisition of Aixtron shares,” sparking hopes among analysts 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.

While the 670-million-euro (US$717 million) deal is small, US opposition is seen as a sign of growing concern in the West about the acquisition of cutting-edge 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.

Gallium nitride is a powdery yellow compound used in light-emitting diodes (LED), radar, antennas and lasers.

Gallium nitride technology can boost the power of weapons systems while making them cheaper because it needs less electricity.

The German firm’s technology is being used to upgrade both US and foreign-owned Patriot missile defence systems.

Analysts have said Aixtron has a bleak future as a standalone 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 for Aixtron such as US chip equipment maker Applied Materials could emerge.

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

It said yesterday that the process was independent of the US review and would continue, without giving a timeline for presenting its conclusions.

“There is still a quite low probability of the deal going through as planned,” a Frankfurt-based trader said.

“But the ball is back in German court as the German Economy Ministry’s review of the Chinese takeover bid is ongoing.”



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