Infineon Agreed to U.S. Security Concessions for Cypress Deal

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(Bloomberg) -- German chip maker Infineon Technologies AG agreed to national security concessions to resolve U.S. concerns about its takeover of Cypress Semiconductor Corp., according to people familiar with the matter.

The $8.7 billion deal was facing resistance from a secretive government panel that reviews foreign investments in U.S. companies, but was ultimately cleared with agreed-upon measures that are intended to protect national security, the people said.

The work of the Committee on Foreign Investment in the U.S. is secret and details of the agreement and the government’s concerns weren’t disclosed. The Trump administration has toughened scrutiny of foreign investment in the U.S. in order to prevent other countries -- primarily China -- from acquiring sensitive technology.

Mitigation agreements can include measures such as limiting access to facilities and information to U.S. citizens, allowing the government to review certain business decisions, requiring certain activities to occur in the U.S., or even walling off the American business from the foreign company.

Cypress and Infineon, which still need a regulatory nod in China before they can close the deal, declined to comment on Cfius’s approval. Cfius as a policy doesn’t comment on its work.

The Cypress deal would lift Infineon into the top 10 of global chipmakers based on sales. While Infineon is German, the company earns a third of its sales in China. Its customers include Huawei Technologies Co., the Chinese telecommunications giant that some U.S. officials fear could be used by Beijing to spy on other countries or disrupt communications. Huawei makes up about 2.4% of Infineon sales, according to data compiled by Bloomberg.

Cypress’s products are used by the aerospace and defense industries, according to the San Jose, California, company’s website.

Most of Cypress’s products find their way into consumer devices and industrial equipment. It supplies a very limited amount of so-called hardened memory chips that are resistant to heat and other environmental factors that might wipe data. While such chips are used in defense applications, one is more likely to find a Cypress component providing short-range Bluetooth radio connectivity in a gadget in one’s living room.

Infineon has faced national security concerns before. In 2017, it tried to buy Wolfspeed, a semiconductor unit of U.S.-based Cree Inc., but the deal was blocked by Cfius.

Trump has blocked three takeovers on national security grounds, Broadcom Inc.’s hostile takeover of Qualcomm Inc., Lattice Semiconductor Corp.’s sale to a Chinese-backed investor and Beijing Shiji Information Technology Co.’s purchase of hotel property management software company StayNTouch Inc.

©2020 Bloomberg L.P.

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