Germany blocks sale of chip factory to China over security fears |  CNN Business

Germany blocks sale of chip factory to China over security fears | CNN Business

CNN Business

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

Germany’s economy ministry said in a statement that it had banned Elmos Semiconductor, which manufactures chips for the automotive industry, to sell its factory of Dortmund to Silex, the Swedish subsidiary of Chinese Sai Microelectronics.

The decision was taken “because the acquisition would have endangered the public order and security of 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 regret the government’s decision.

“The transfer of new micromechanical technologies … from Sweden and significant investments at the Dortmund site would have boosted semiconductor production in Germany,” Elmos said, adding that he plans to take legal action.

“We need to look closely at business acquisitions when it comes to important infrastructure or when there is a risk that technology will flow to acquirers from non-EU countries,” the German minister said. of the Economy, Robert Habeck, during 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 rattled German authorities fearing that Chinese investment in its critical infrastructure would compromise its intellectual property and expose it to political pressure from Beijing.

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

The authorities limited the planned investment in Hamburger Hafen und Logistik to 24.9%. Several government ministers, including Habeck, lobbied for the deal to be stalled entirely.

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

Just last week, Chancellor Olaf Scholz met Chinese leader Xi Jinping in the first visit by a G7 leader to Beijing in about three years, a trip designed to bolster export markets as part of Germany’s ties with Russia – once its biggest supplier of natural gas – continue to unravel.

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

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

The visit came just a month after the United States introduced strict controls on chip exports to China, a move intended 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 chipmaking equipment without a license.

The rules threaten to deal a blow to China’s ambitions to become a tech superpower, as they ban 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 He contributed reporting.

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