President Obama to Rule on Aixtron Acquisition

Aixtron says that the CFIUS investigation for the proposed acquisition of Aixtron has lapsed. Aixtron SE of Herzogenrath, Germany, reports that the investigation period for the Committee on Foreign Investment in the United States (CFIUS) examining the company’s proposed acquisition by Grand Chip Investment GmbH (GCI) lapsed on Midnight EST on November 17, 2016. Grand Chip Investment GmbH is the German subsidiary of Fujian Grand Chip Investment Fund LP, which is composed of mainly private sector Chinese investors.

CFIUS’ role is to investigate whether mergers pose a threat to national security as they relate to the stable supply of vital technology for defense and military applications. CFIUS did not issue a letter to close out the investigation. However, CFIUS did inform GCI and Aixtron that it found unresolved U.S. national security concerns related to the transaction.

Security Concerns

Aixtron makes equipment that is excellent at industrial scale manufacturing of gallium nitride integrated circuits that go into LEDs, lasers, antennas, and radars, and RF and Radar jammers. While not specifically mentioned, the speculation in the semiconductor industry is that the technology most at issue in the proposed acquisition is gallium nitride-based radar and jammers. Gallium nitride allows radar to operate at higher frequencies than conventional radar. Also, gallium nitride-based jammers allow fighter jets and other aircraft to fly undetected.

CFIUS Recommendations

CFIUS says it intends to recommend to the U.S. President that the transaction be prohibited, concluding that there would be no reasonable way to mitigate the U.S. national security risks it perceived despite the mitigation proposals submitted by the companies so far.  As a consequence, CFIUS recommended the companies request withdrawal of their notice of the proposed acquisition and abandon the entire transaction.

Both, GCI and AIXTRON have decided not to follow the CFIUS recommendation. Instead, the matter has been referred to the U.S. President who must render a decision within 15 calendar days to block or allow the proposed transaction.