BERLIN (Reuters) –The German government on Wednesday blocked prospective Chinese investment in two domestic semiconductor producers after the moves raised concerns over national security and the flow of sensitive technological know-how to Beijing.
The government said it had vetoed the takeover of the chip factory of the Dortmund-based company Elmos by Silex, a Swedish company that is a subsidiary of Chinese group Sai Microelectronics.
Berlin also blocked investment in ERS Electronic, which is based in the southern state of Bavaria, government sources told Reuters. A spokesperson for ERS Electronic said there was no plans to sell the company but it had been exploring the option of getting investment from a Chinese private equity firm.
The decisions came at a time of heightened sensitivity around relations between Berlin and Beijing.
Sai Microelectronics said it “deeply regrets” the decision and will study the details to decide on any next steps.
“The company will continue to be optimistic about and attach importance to the automotive chip industry and related business,” the Shenzhen-listed chip developer and wafer maker said in a filing to the Shenzhen bourse.
The government of Chancellor Olaf Scholz, who visited China last week, is trying to balance a push for access to the Chinese market for European companies with addressing security concerns and reducing Germany’s trade reliance on China.
It has been reviewing its policy towards China especially in the wake of Russia’s invasion of Ukraine in February, which exposed Germany’s heavy dependence on Russian gas.
“We have to look at company takeovers closely, when it comes to important infrastructure or when there is a danger that technology flows to buyers from non-EU countries,” Economy Minister Robert Habeck said in a statement.
“Especially in the semiconductor sector, it is important to us to protect the technological and economic sovereignty of Germany and Europe. Of course, Germany is and will remain an open investment location, but we are not naive either.”
Elmos could not be reached for comment. A spokesperson for China’s foreign ministry said Beijing wanted a fair and open environment for Chinese investment.