US blocking Chinese acquisitions of tech companies seen as a ‘red flag’

FILE PHOTO: Chinese and US flags are set up for a meeting at China's Ministry of Transport in Beijing, China. REUTERS/Jason Lee

SHANGHAI (Reuters) – Chinese state-backed tabloid the Global Times called US efforts to block cross-border acquisitions of tech companies a “red flag” that impedes China’s tech sector and disrupts the growth of the global tech sector.

The outlet, which is published by the People’s Daily, China’s official newspaper for the ruling Communist Party, argued a recent attempt to block a Chinese purchase of a Korean chip company “represents a dangerous precedent for the industry as a whole.”

“If the US succeeds in blocking the deal this time, it could set a very bad precedent for global high-tech mergers and acquisitions, further consolidating the industrial concentration in the US,” the op-ed read. 

In March, China-based private equity group Wise Road Capital announced it would purchase Korea’s Magnachip Semiconductor Corp for $1.4 billion.

On Monday, Magnachip said in an SEC filing that the US Department of Treasury, in a letter to the company’s legal counsel last Friday, said the acquisition posed “risks to the national security of the United States.”

The chip sector has become a hotbed for tensions between the US and China. 

Both countries are pouring billions into their domestic industries, with the recognition that semiconductors are critical to national security and economic development.

Cross-border acquisitions, which require approval from regulatory bodies, have at times fallen apart because of government objections.

In 2018, Qualcomm Inc’s planned $44 billion acquisition of Dutch chipmaker NXP Semiconductors NV failed after China’s anti-monopoly regulator signalled it would not approve the deal.

That same year, Singapore’s Broadcom Inc withdrew its $117 billion bid to acquire Qualcomm after Washington’s Committee on Foreign Investment in the United States (CFIUS) said the purchase could endanger the US’ national security by aiding China. 

(Reporting by Josh Horwitz. Editing by Gerry Doyle)

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