One Chip Deal Could Define Trump’s China Policy

With fewer than 1,000 staff and less than $450 million in annual revenue, Portland, Oregon-based Lattice Semiconductor Corp. barely rates a mention in the annals of global technology.

That obscurity may be overturned by President Donald Trump, at least if CEO Darin Billberbeck and Canyon Bridge Capital Partners LLC have their way.

Canyon, a Silicon Valley-based private equity firm, wants to buy Lattice. The problem: Canyon is the U.S. face for what actually links back to a Chinese state-owned asset manager, and Lattice makes chips that could have military applications.

Broken Crutch

Canyon’s offer propped up Lattice’s stock, but earnings disappointments and the prospect of the deal failing have sent shares back down

Source: Bloomberg

I previously wrote about this deal when the parties submitted it to the Committee on Foreign Investment in the U.S. for a third 75-day review back in June. It now looks like that clock will wind down without the sought-after nod from the panel of cabinet-level chiefs and their associated bureaucrats.

It’s worth reiterating that CFIUS doesn’t actually approve or kill a transaction, it merely makes recommendations to the president, who then gives an official thumbs up or down.

Fully aware of this process, Canyon and Lattice are set to take their case straight to Trump, Bloomberg’s David McLaughlin and Jonathan Browning report.

That’s a risky strategy. If the president blocks the purchase, the buyer may be branded a national security threat, which could hurt prospects for future transactions. But given Canyon’s major role right now is to front for this deal, and the money behind it can easily be moved to another vehicle, that’s a risk they seem willing to take.

We’d normally expect a president to heed the recommendations of a panel of experts — Barack Obama turned down a Chinese acquisition of Aixtron SE after CFIUS declined to give it a green light. But Trump has torn up the presidential playbook.

This is exactly what Canyon is betting on, and it clearly likes the odds that Lattice and its team of lobbyists can convince POTUS to let the deal through. 

With no quarterly profit since 2014, Canyon can claim it will invest new funds into Lattice — thus saving hundreds of jobs and helping to Make America Great Again. It can play down national security concerns by pointing out that every chip has potential military applications — even pedestrian memory chips. Besides, no one is forcing the U.S. government to buy from Lattice, and Canyon can promise to excise those sensitive product lines from any acquisition.

Profitable Loss

It’s been a long time since Lattice was a profitable company. That may help Canyon’s case for a buyout

Source: Bloomberg

More importantly, as a conduit for Chinese-state money, Canyon has an almost patriotic duty to try and set a precedent, given the long queue of other deals waiting to be reviewed. Convincing Trump to say yes could make them heroes back home amid President Xi Jinping’s drive to turn China into a global tech powerhouse — through indigenous development or acquisition.

Canyon has a rare chance to shape the U.S. president’s policy on China. No wonder it’s going all in.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tim Culpan in Taipei at [email protected]

To contact the editor responsible for this story:
Katrina Nicholas at [email protected]


READ ---  Unified payments interface: HDFC Bank to reconsider UPI charges