Germany blocks sale of chip factory to China over security fears


London/Berlin
CNN Business

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

Germany’s economy ministry said in a statement that it had banned Elmos Semiconductor, which makes chips for the automotive industry, is selling its factory Dortmund For the Swedish subsidiary Silex of China’s Sai Microelectronics.

The decision was made “because the acquisition would have endangered German public order and security,” the ministry said in a statement.

In December, Silex announced that it had signed an agreement with Elmos to purchase 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 micromechanics technologies from Sweden and the large investment in the Dortmund site would have strengthened semiconductor production in Germany,” Elmos said, adding that he was considering legal action.

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“We have to look carefully at acquisitions of companies when important infrastructure is involved or when there is a risk of technology going to buyers from outside the EU,” German Economy Minister Robert Habeck said at a press conference.

He added that the semiconductor industry in Europe in particular must protect its “technological and economic sovereignty”.

The planned deal has raised concerns among German authorities that Chinese investment in its critical infrastructure could harm its intellectual property and leave it under political pressure from Beijing.

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

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Officials limited the planned investment in Hamburger Hafen und Logistik to 24.9%. Several government ministers, including Habeck, sought to block the deal entirely.

The tension comes at a difficult time for the German economy, which is sliding into recession caused by the Russian energy crisis. German manufacturers and exporters want to maintain close ties with China.

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

A delegation of major industrial executives, including executives from Volkswagen ( VLKAF ), Siemens ( SIEGY ) and chemical giant BASF ( BASFY ), traveled with Scholz to Beijing to meet with Chinese business leaders.

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But Habeck issued a warning Wednesday. Speaking about the blocked chip deal, he stressed that “Germany is and will remain an open investment destination” but that it was not “naïve”.

The visit comes just a month after the United States imposed strict controls on chip exports to China, a move aimed at protecting its national security and boosting the domestic semiconductor industry.

In early October, the Biden administration banned Chinese companies from buying advanced chips and chip-making equipment without a license.

The rules threaten to be a major blow to China’s ambitions to become a tech superpower, as they not only ban the export of chips made anywhere in the world using US technology, but also the tools used to make them.

Laura He contributed to the reporting.

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