Lawmakers ask U.S. to block Chinese takeover of Lattice Semiconductor

WASHINGTON (Reuters) - More than 20 U.S. Congress members wrote to U.S. Treasury Secretary Jack Lew on Monday asking for the acquisition of U.S. chip maker Lattice Semiconductor Corp LSCC.O by a fund with ties to China's government to be blocked over security concerns.

China's nation flag flies on Tiananmen Square in front of the portrait of the former chairman Mao Zedong ahead of the closing ceremony of the National People's Congress (NPC) at the Great Hall of the People in Beijing, March 14, 2012. REUTERS/David Gray/File Photo

The letter follows a Reuters report last week that revealed that Canyon Bridge Capital Partners, the buyout fund that agreed to acquire Lattice for $1.3 billion, is funded partly by cash originating from China’s central government and has indirect links to its space program.

In their letter, the 22 lawmakers wrote that the deal could disrupt the U.S. military supply chain and possibly lead to a reliance on foreign-sourced technologies for many critical U.S. Defense Department programs.

They also pointed to a warning last month by U.S. Secretary of Commerce Penny Pritzker that the United Stated will not accept China’s “$150 billion industrial policy designed to appropriate this industry.”

“Anything other than a rejection of the acquisition of Lattice by this People’s Republic of China-front entity would seem to undermine Secretary Pritzker’s public commitment,” the lawmakers’ letter stated.

The members of Congress, Republican and Democrat, wrote to Lew in his capacity as chairman of the Committee on Foreign Investment in the United States (CFIUS), a government panel that scrutinizes the acquisitions of companies by foreign firms on national security grounds.

Representatives for CFIUS and Canyon Bridge did not immediately respond to requests for comment. Lattice declined to comment.

Portland, Oregon-based Lattice makes programmable chips known as "field programmable gate arrays" that allow companies to put their own software on silicon chips for different uses. It does not sell chips to the U.S. military, but its two biggest rivals - Xilinx Inc XLNX.O and Intel Corp’s INTC.O Altera - make chips that are used in military technology.

China has been working to develop its space program for military, commercial and scientific purposes. As a result, the United States has been wary of China’s motives in semiconductor deals, and this skepticism is expected to grow after U.S. President-elect Donald Trump, which has already taunted China on issues ranging from trade to relations with Taiwan, is inaugurated next month.

In their letter, the lawmakers called on CFIUS to act as decisively as it did in the case of German semiconductor equipment maker Aixtron SE AIXGn.DE. Last week, U.S. President Barack Obama upheld a recommendation by CFIUS to block Aixtron's 670 million euro ($717 million) sale to Fujian Grand Chip Investment Fund over national security concerns.

Reporting by Greg Roumeliotis in Washington; Additional reporting by Liana B. Baker and Diane Bartz in Washington; Editing by Lisa Shumaker