Trump Forces Chinese-Owned Firm to Reverse Chip Deal Over National Security Concerns

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U.S. Orders Chinese-Owned Company to Unwind Chip Deal Amid Security Concerns

In a significant move reflecting heightened concerns over national security, the United States has ordered a company controlled by a Chinese national to unwind a $2.9 million acquisition of chip assets from a U.S. manufacturer. This decision underscores the growing scrutiny of foreign investments in critical technology sectors, especially as tensions between the U.S. and China continue to escalate.

The U.S. government identified several risks associated with the deal, particularly concerning the potential diversion of indium phosphide chips manufactured by Emcore’s digital chips business away from the U.S. These chips are vital for various applications, including defense systems and advanced navigation equipment. The White House cited national security concerns in its executive order, stating that the company, HieFo Corporation, was "controlled by a citizen of the People's Republic of China."

HieFo acquired the digital chips and related wafer design, fabrication, and processing businesses of New Jersey-based Emcore on April 30, 2024. This included a semiconductor manufacturing facility, according to the Treasury Department. The acquisition raised alarms about the potential access to Emcore’s intellectual property, proprietary know-how, and expertise.

The Treasury Department emphasized that the deal was not notified to the Committee on Foreign Investment in the United States (CFIUS), prompting a review by its non-notified transactions team. CFIUS identified a national security risk arising from the transaction, leading to the order for HieFo to divest all acquired assets within 180 days and to immediately restrict access to Emcore's technical information.

HieFo and Emcore did not immediately respond to requests for comment. However, the Global Times, a Chinese government mouthpiece, suggested that the divestment order reflects Washington's anxiety over technology competition with China, citing an expert who claimed the decision was made without a convincing rationale.

In a statement dated September 2, 2024, HieFo stated that the deal would allow operations to continue at Emcore's facility in Alhambra, California, and that it had "successfully engaged" nearly all key scientists, engineers, and operational staff. HieFo was founded by Genzao Zhang and Harry Moore through a management buyout of wafer fabrication and chip-related assets from Emcore. Both founders list their start dates at HieFo as May 2024 on LinkedIn, when the acquisition closed.

The company claimed it had inherited more than 40 years of optoelectronic innovation in indium phosphide chip manufacturing. Emcore, which manufactures navigation equipment such as gyroscopes and sensors used in commercial, industrial, and defense applications, including autonomous navigation and weapons systems, was delisted from Nasdaq in early 2025 following its merger with aerospace manufacturing holding company Velocity One LP in November 2024.

This case highlights the increasing scrutiny of foreign tech deals, especially those involving sensitive technologies and supply chains. As the U.S. and China continue to compete for technological dominance, such actions are likely to become more frequent, shaping the landscape of international trade and investment.