Proposed Chinese Acquisition Of Chipmaker Micron Will Face Tough National Security Review

A bid by China’s largest computer chip maker to take over Micron, one of the largest American computer chip companies, has raised a large number of eyebrows in Washington. China’s offer to buy out the American company that produces millions of chips used in smartphones all over the country will severely compromise U.S. security and ultimately the safety of the everyday American according to many who have analyzed the deal.

Tsinghua Unigroup, a Chinese state owned company, is proposing a $23 billion buyout of Micron, the fourth largest semiconductor maker in the world. The deal was reported on Tuesday, pricing each share of Micron at $21. Though experts determined the valuation as being too low, concern was also leveled towards implication Chinese control over the chipmaker would have on national security.

China’s emerging economy has seen the country’s appetite for technological advancements grow enormously, along with it appetite for hacking. The Chinese navy has more than doubled, military bases have been built on artificial islands in the ocean and an expanding air force set to bring the U.S. within are reach are but some of the advancements that have caused plenty of unease in Washington.

More notably, the recent theft of employee records of every U.S. government employee was traced back to China, which has waged an unprecedented cyberwar against American targets in both government and industry.

But where do computer chips come in? War machines now all run on computers, which in turn run on computer chips. Tsinghua’s planned acquisition of Micron, which incidentally also makes chips used in smartphones across North America, raises fears that the chips would be used in manufacturing military weapons or embedded with backdoors that would allow Chinese hackers to easily control a variety of military and civilians computer-enabled devices.

Mergers and acquisitions experts say the proposed deal will require the notoriously strict approval of the Committee of Foreign Investments in the United States (CFIUS). CFIUS is an inter-agency committee consisting of more than a dozen highly specialized agents from across all departments of the United States government. The committee is responsible for determining whether potential mergers and acquisitions involving U.S. companies do pose a threat to national security.

Anne Salladin, special counsel at Stroock & Lavan, said the deal would likely come under the sharp scrutiny of the CFIUS. She said, “It appears to have all the hallmarks – China, foreign government control and US high-tech – which can often result in heightened scrutiny by CFIUS.”

Transactions covered by CFIUS undergo a 30-day review. Should security concerns be realized, the case would undergo a 45-day probe after which the committee would ask the U.S. President to make a determination.

Experts believe the deal, which comes amid heightened worry over cyber attacks attributed to Chinese hackers, will not be approved. Senior analyst Mark Newman, Bernstein Research, said the bid “would have a high risk of not going through due to the national security concerns of selling advanced semiconductor manufacturing technology to China.”

Tsinghua’s acquisition of Micron would hand China unlimited access to NAND and DRAM memory chips used in computers and mobile devices for data storage across the U.S.. To say the American people’s security and right to privacy would be compromised would be an understatement. Concern over the major acquisition is well placed. Washington must act in the best interests of the country.

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