Chinese firm eyes U.S. disk drives maker-report

NEW YORK, Aug 25 (Reuters) - A Chinese technology company has expressed interest in buying a U.S. computer disk drives maker, raising concerns among U.S. officials of national security risks from transferring the high technology to China, The New York Times reported on Saturday.

William Watkins, chief executive of Seagate Technology STX.N, one of the two remaining U.S. drive makers, disclosed the overture in an interview, the Times said.

The possibility has resurrected issues of economic competitiveness and national security such as were raised three years ago when Chinese computer maker Lenovo bought IBM's IBM.N personal computer business, the Times said.

Watkins did not identify the Chinese company, but said the possible acquisition had set off alarm bells at some government agencies, the Times said. Seagate, based in Scotts Valley, California, has recently begun selling drives with hardware encryption abilities.

Government officials told the newspaper that while disk drives do not fall under a list of export-controlled technologies, moves to purchase a U.S. disk drives company would require a security review by federal officials.

The other disk drive company is Western Digital, based in Lake Forest, California. Officials there declined to comment to the newspaper.

“The U.S. government is freaking out,” Watkins was quoted as saying by the newspaper.

U.S. Treasury officials reached by the newspaper declined to comment on the possibility of Chinese overtures for such a deal, it said.

Watkins added that Seagate, the largest U.S. drive maker, was not for sale, but that if a high enough premium were offered to shareholders it would be difficult to stop, the Times said.

The newspaper quoted one industry executive involved in classified government advisory groups as saying that “Seagate would be extremely sensitive ... I do not think anyone in the U.S. wants the Chinese to have access to the controller chips for a disk drive. One never knows what the Chinese could do to instrument the drive.”

“This is clearly a critical component of a computer system and the purchase by the Chinese or other nations merits a full review to determine what our risks are,” the Times quoted Michael Wessell, a commissioner of the U.S.-China Economic and Security Review Commission, as saying.

The commission monitors national security implications of trade with China for the U.S. Congress.

Reporting by Chris Michaud, editing by Vicki Allen; 202-898-8457