China is spending a lot of money on a major push to manufacture its own chips, a move that could boost its military abilities and the homegrown technology industry.
An expert unveiled that worries over China's chip ambitions were central to the U.S. officials' blocking of the proposed $2.9 billion purchase of a major stake in a unit of Dutch electronics company Philips by Chinese investors.
The rare hindrance underscores increasing concern in Washington about China's efforts to acquire the knowledge to manufacture semiconductors that function as the brains of all sorts of complex electronics, including military applications such as missile systems, according to the New York Times.
With regard to the Philips deal, the company said that it would end a March 2015 agreement to sell a majority share in its auto and light-emitting diode components venture called Lumileds to a group that included the Chinese investors GSR Ventures and GO Scale. According to China Technology News, the company cited concerns raised by the Committee on Foreign Investment in the United States (CFIUS), which is charged with the responsibility of reviewing whether foreign investments in the country present a national security risk.
Amid efforts to alleviate concerns, the committee did not endorse the transaction.
A senior fellow at the Center for Strategic and International Studies, James Lewis, said, "There is a belief in the CFIUS community that China has become innately hostile and that these aren't just business deals anymore."
CFIUS reviews have become a growing problem for outbound Chinese deals. Based on the latest data, in 2012 and 2013 Chinese investment underwent more committee reviews as compared to money coming from any other country. A 2008 Chinese move to invest in the network equipment firm 3Com was withdrawn while the committee was conducting a review.
In the recent past, the committee legitimized several Chinese deals, including the acquisition of Smithfield Foods by Shuanghui International and Lenovo's takeover of IBM's low-end server unit.
However, 2012 saw President Obama ordering a Chinese firm to stop constructing wind farms near an American military installation in Oregon after a negative CFIUS review.