U.S blocks Chinese acquisitions of global tech firms

Chinese state-backed tabloid the Global Times called U.S. efforts to block cross-border acquisitions of tech companies a “red flag” that impedes China’s tech sector. And also, disrupts the growth of the global tech sector. People’s Daily, China’s official newspaper for the ruling Communist Party published an outlet, in which they had argued a recent attempt to block a Chinese purchase of a Korean chip company. This represents a preceding danger for the industry.

If the US succeeds in blocking the deal this time, it could set a very bad precedent for global high-tech mergers and acquisitions. And then, consolidating the industrial concentration in the US. In March, China-based private equity group Wise Road Capital announced that they would purchase Korea’s Magnachip Semiconductor Corp for $1.4 billion. Regarding this Magnachip said in an SEC filing that, the U.S. Department of Treasury, acquiesced risks to the national security of the United States. The chip sector has become a hotbed for tensions between the U.S. and China.

Billions are spent on domestic industries by both the countries. This is in recognition that semiconductors are critical to national security and economic development. Cross-border acquisitions have at times fallen apart because of the government objections. Qualcomm Inc’s had planned $44 billion acquisition of Dutch chipmaker NXP Semiconductors, in 2018. In that same year itself, Singapore’s Broadcom Inc withdrew its $117 billion bid to acquire Qualcomm. This is after Washington’s Committee on Foreign Investment in the United States (CFIUS) stated that the purchase could endanger the U.S’ national security by aiding China.