^{Photo: The New York Times}

U.S. Moves to Reverse Chip Asset Sale

U.S. President Donald Trump has ordered a Chinese-controlled company to unwind a semiconductor asset acquisition, citing national security risks tied to sensitive technology and supply chains. The decision underscores Washington’s increasingly aggressive stance on foreign involvement in critical U.S. technology sectors, particularly semiconductors.

The order requires HieFo Corporation, a Delaware-incorporated company controlled by a Chinese national, to reverse its $2.9 million purchase of digital chip assets from U.S.-based Emcore. The transaction was completed in April 2024 and included wafer design, fabrication, processing operations, and a semiconductor manufacturing facility.

Why the Deal Raised Red Flags

According to the White House, the acquisition posed risks related to U.S. access and control over advanced semiconductor technology. The Treasury Department said concerns centered on potential exposure of Emcore’s intellectual property, proprietary manufacturing know-how, and technical expertise.

A key issue identified was the supply of indium phosphide chips, a specialized semiconductor material used in high-speed communications, sensing, and defense-related applications. Officials warned that the transaction could result in the diversion of this strategic supply away from the United States, weakening domestic resilience in a critical technology area.

Indium phosphide chips are considered particularly sensitive due to their role in military systems, autonomous navigation, secure communications, and advanced optical technologies.

CFIUS Review and Enforcement Action

The transaction was not voluntarily disclosed to the Committee on Foreign Investment in the United States, or CFIUS, which reviews foreign investments for national security risks. As a result, the deal was flagged by CFIUS’s non-notified transactions team and subjected to a retroactive review.

Following that review, the administration concluded that the risks could not be mitigated and issued a formal divestment order. HieFo has been given 180 days to fully divest the acquired assets and must immediately restrict any access to Emcore’s technical data, designs, and proprietary information.

Company Background and Claims

HieFo was founded by Genzao Zhang and Harry Moore through a management buyout of Emcore’s wafer fabrication and chip-related operations. The company has said it inherited more than four decades of innovation in indium phosphide-based optoelectronics and aimed to continue operations at the Alhambra, California facility.

In a statement issued shortly after the acquisition closed, HieFo said it had retained nearly all key scientists, engineers, and operational staff, positioning the deal as a continuity play rather than a transfer of technology overseas.

Neither HieFo nor Emcore immediately commented following the divestment order.

Strategic Importance of Emcore’s Technology

Emcore manufactures advanced navigation components, including gyroscopes and sensors used across commercial, industrial, and defense sectors. Its technologies are deployed in applications ranging from autonomous vehicles to aerospace systems and military hardware.

Given the dual-use nature of these products, U.S. officials have increasingly classified such technologies as strategically sensitive, particularly amid intensifying competition with China in semiconductors, artificial intelligence, and advanced manufacturing.

Reaction From China

Chinese state-affiliated media criticized the decision, arguing that the forced divestment reflects Washington’s growing anxiety over technological competition rather than clear security threats. Commentators framed the move as part of a broader pattern of U.S. efforts to restrict Chinese access to advanced technologies.

The case adds to a growing list of transactions caught in the crossfire of U.S.-China rivalry, particularly in areas tied to chips, telecommunications, and critical infrastructure.

A Broader Shift in U.S. Policy

The order highlights how aggressively the U.S. is now policing semiconductor-related transactions, even those involving relatively small dollar amounts. While the deal was valued at just $2.9 million, officials focused on strategic impact rather than size.

In recent years, Washington has expanded export controls, investment screening, and industrial policy measures aimed at protecting domestic chip capabilities and limiting technology transfer to geopolitical rivals.

What This Means for Investors and Dealmakers

The forced unwind sends a clear signal to global investors and acquirers that semiconductor deals involving foreign ownership, especially Chinese-linked entities, face heightened regulatory risk. Even completed transactions can be reversed if deemed a threat to national security.

For U.S. tech firms, the case reinforces the importance of early engagement with regulators. For foreign buyers, it underscores the narrowing path for acquisitions in sensitive technology sectors as geopolitical competition reshapes global dealmaking.