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The White House has intervened in a business transaction between a Chinese-backed private equity firm and a US chipmaker. US President Donald Trump has blocked Canyon Bridge Capital Partners planned $1.3 billion acquisition of Lattice Semiconductor Corp. The decision has sent a clear message to Beijing that Washington will vehemently oppose any takeover deals that involve technologies that may have potential military applications. The bid by the Chinese-backed equity company was one of the largest ever attempted on the US microchip sector.

US regulators became more focused on the business activities Canyon Bridge were engaging in when it emerged that the firm was largely funded by capital from China’s central government and had indirect links to its space program. In addition to this, Canyon Bridge came across the radar of US defense officials when it became clear that company behind the Lattice acquisition bid was backed by the Chinese government – and this subsequently sparked severe security concerns.

Lattice Semiconductor Corp is headquartered in Oregon and makes chips known as field-programmable gate arrays, which enables companies to put their own software on silicon chips for different uses. The company publicly stated that it didn’t sell its chips to the US military anymore, unlike its two biggest competitors, Xilinx and Intel’s Altera.

It has been reported that President Trump stated in an executive order that Lattice and the Chinese-backed private equity firm shall take all steps necessary to fully and permanently abandon the proposed transaction within 30 days. Trump’s decision echoes the sentiments of the Committee on Foreign Investment in the US (CFIUS), which is a body that scrutinizes deals for potential national security threats.

US Treasury Secretary, Steven Mnuchin issued a statement confirming that both the CFIUS and the President have assessed that the transaction between the two companies pose a risk to the national security of the United States, and furthermore can’t be resolved through mitigation. The US Treasury Secretary did highlight that the risk of national security was related to the potential transfer of intellectual property and the Chinese government’s direct involvement in the deal.

However, China has expressed their disappointment and concern regarding the decision made by the US President and the US Committee on Foreign Investment. Chinese Commerce Ministry spokesman Gao Feng said he respected the US was fully in within its rights to examine the security implications surrounding potential foreign investment, but he was disappointed by how the US had conducted itself during its investigation.

He said, “We believe conducting security examinations of investments in sensitive sectors is a country’s legitimate right, but it should not become a tool for advancing protectionism and we hoped that the United States could view Chinese firms’ acquisitions objectively and provide fair treatment to what was their “normal commercial behavior”. Lattice and Canyon Bridge released a joint statement on Wednesday declaring that they had terminated the proposed deal. Lattice also said it is committed to achieving profitable growth.