China Banned From Purchasing Microchip Factory

Germany’s government last week blocked the sale of one of its semiconductor factories to a Chinese-owned tech company, citing security concerns.

The German economic ministry announced in a statement that it prohibited Elmos Semiconductor, a company that manufactures chips for the automotive industry, from selling its Dortmund factory to Silex, a Swedish subsidiary of the Chinese company Sai Microelectronics.

In its statement, the ministry explained that the “acquisition would have endangered the public order and safety of Germany.”

Silex announced last December that it has signed an agreement with Elmos to purchase the Dortmund factory for €85 million ($85.4 million US).

In a statement, Elmos said both companies regretted the ministry’s decision. The company argued that the transfer of new “micromechanics technology” from Sweden and the “significant investments in the Dortmund location” would have boosted semiconductor production in Germany.

Elmos is considering taking legal action to ensure the sale can go through.

China’s Sia Microelectronics said in a statement last Thursday that it regretted the German government’s decision.

After Germany blocked the sale, Sia’s shares fell more than 9 percent in Shenzhen.

In a press conference last week, economic minister Robert Habeck told reporters that the German government must “take a close look” at any company acquisitions in which “important infrastructure is involved” or if there is a risk of the technology “flowing to acquirers from non-EU countries.” He added that it is particularly important for Europe’s semiconductor industry to protect the EU’s “technological and economic sovereignty.”

Silex’s planned deal to acquire Elmos rattled German authorities long concerned that Chinese investment in its infrastructure could compromise its intellectual property while leaving it at the mercy of political pressure from Beijing.

In October, the German government intervened in plans by Chinese shipping company Cosco to purchase a 35 percent stake in the operator of a Hamburg port terminal. Several government ministers, including Robert Habeck, pushed for the deal to be blocked entirely.