Germany blocks two chipmakers sale to China

Berlin: Germany on Wednesday blocked the sale of two chipmakers to Chinese investors because of a potential threat to security.

"We must look very closely at company takeovers when it relates to important infrastructure or when there is a danger that the technology would flow to buyers from non-EU countries," said Economy Minister Robert Habeck.

Chinese company Sai MicroElectronics had been seeking to buy the Dortmund factory of Elmos through its Swedish subsidiary Silex.

The German government had rejected the planned takeover because "the purchase could endanger the order and security of Germany," said the economy ministry.

Other ways of reducing the risks, including allowing the acquisition under certain conditions, were "unable to eliminate the identified dangers", it added.

A second acquisition had been turned down, Habeck said, without naming the companies involved because of "trade secrets". But Germany´s minister for research Bettina Stark-Watzinger named the company as Bavaria-based ERS Electronic, which supplies a cooling technology to wafer manufacturers.

Fears have been growing in Europe´s economic powerhouse about an over-reliance on Beijing, and letting critical infrastructure fall into the hands of Chinese state-linked companies.

Russia´s invasion of Ukraine and its subsequent dwindling of crucial gas supplies to Europe has further accentuated the concerns.

In particular, the microchip industry has come under scrutiny, as it produces key components used across industry from consumer electronics to battery-powered vehicles.

Earlier this year, the European Union unveiled a multibillion euro "Chips Act" aimed at doubling Europe´s market share in semiconductors and reducing dependence on supplies from Asia.

Elmos, which primarily builds components for the automobile industry, said late last year it intended to sell the production facility at its headquarters. Silex was seeking to buy the site for 85 million euros ($85.4 million).