Analysis of the Impact of U.S. Blocking Chip Transactions on National Security Grounds on Cross-Border M&A Investments in the Semiconductor Industry

Based on the latest collected data and information, I provide a comprehensive analysis of the impact of the U.S. blocking chip transactions on national security grounds on cross-border M&A investments in the semiconductor industry:

2026年1月2日，美国总统特朗普发布行政命令，强制HieFo Corp.剥离其于2024年4月以292万美元收购的Emcore公司半导体资产[1][2]。关键要点包括：

• HieFo was established and controlled by a Chinese citizen
• Involves indium phosphide wafer manufacturing and digital chip-related technologies
• The U.S. government believes the transaction “may threaten U.S. national security”

• Complete asset divestment within 180 days
• Full supervision by CFIUS
• Prohibition of access to non-public technical information
• Weekly submission of compliance certificates [1][2]

• Traditional CFIUS
  : Reviews foreign investments in the U.S. (e.g., HieFo’s acquisition of Emcore) [1]
• Reverse CFIUS
  : Restricts U.S. investments in China, officially effective on January 2, 2025, covering three areas: semiconductors, AI, and quantum [3][5]

The “America First Investment Policy Memorandum” signed by the Trump administration in February 2025 clearly states: [4][5]

• Expand CFIUS jurisdiction to “healthcare, agriculture, energy, raw materials, and other strategic industries”
• For the first time, include “greenfield investments” (new investments) in CFIUS reviews
• Expand the definition scope of “emerging and foundational technologies”

According to the latest policies: [4][5]

• Provide a “fast track” for ally countries
• Set higher barriers for “adversary countries” such as China
• Focus on entities and individuals “linked to China”
• Can retroactively investigate completed transactions (e.g., HieFo-Emcore was revoked nearly a year after completion)

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• From 2024 to 2025, Chinese semiconductor M&A transactions in the U.S. decreased significantly [5]
• Number of CFIUS review cases hit a historical high
• Imbalance between simplified reports and formal notification reviews; most need to enter formal review procedures [5]

• Extended Transaction Cycle
  : Review time extended from the usual 30-75 days to 6-12 months
• Increased Transaction Costs
  : Need to invest more legal and compliance resources
• Decreased Completion Rate
  : Even if preliminary approval is obtained, it may still be retroactively revoked (HieFo case)

[0]

Semiconductor ETF	2024-2025 Growth	Volatility
SMH (Equipment)	+108.95%	2.29%
SOXX (Industry)	+59.52%	2.34%

Despite strong market performance, policy uncertainty has led to a significant decline in cross-border M&A transaction activity.

According to the MIR Industry Research report, China’s semiconductor investments in the first half of 2025 showed a pattern of “manufacturing-led, multi-point collaboration”: [6]

• Wafer manufacturing accounts for 51.4%
  : Capacity expansion becomes the core
• Chip design accounts for 18.7%
  : Supported by domestic substitution policies
• Semiconductor materials account for 13.0%
  : Accelerated localization
• Packaging and testing account for 9.2%
  : Steady development

1. “Decoupling” Investment
   : Shift to “friendly” regions such as Southeast Asia and Europe
2. Technology Breakthrough Investment
   : Focus on localized substitution rather than cross-border M&A
3. “Curve” Investment
   : Indirect entry through third countries or non-sensitive technology fields

• Phased Acquisition
  : Set multi-stage payment and condition-triggering mechanisms
• Technology Licensing Instead of Acquisition
  : Replace asset acquisition with technology licensing
• Joint Venture Model
  : Adopt JV instead of M&A structure
• Asset Divestment Plan
  : Pre-design asset divestment or isolation mechanisms

• HieFo Event
  : Completed transaction was still forced to divest nearly a year later [1][2]
• Infineon-Wolfspeed (2017)
  : $850 million acquisition blocked by CFIUS [3]
• Subsequent Impact
  : All M&A transactions involving Chinese backgrounds need to assume review risks

• Non-sensitive Fields
  : Valuations are relatively stable
• Sensitive Technology Fields
  : Discount of 20-40% to reflect policy risks
• China-Linked Enterprises
  : Increased financing difficulty and higher financing costs

According to Q1 2025 data, semiconductor financing shows characteristics of “high activity and sufficient confidence”: [6]

• Large-scale financing is concentrated in equipment and materials fields
• RMB funds become the main source of capital
• U.S. dollar funds have reduced willingness to invest in sensitive fields

[0]

Indicator	EMKR Data	Industry Average
Market Capitalization	$28.11 million	N/A
P/B Ratio	0.62x	3-5x
Current Ratio	2.83	>2
Net Profit Margin	-21.01%	15-25%

Small semiconductor companies face valuation pressures and financing challenges.

• Double Control of Export Restrictions + Investment Limits
  : Form a comprehensive technical blockade [3][4]
• “Long-Arm Jurisdiction”
  : Overseas products using U.S. technology are also restricted
• Ally Collaboration
  : Promote the EU and others to establish similar CFIUS mechanisms [3]

• U.S. Domestic Manufacturing
  : CHIPS Act promotes capacity return
• “Friendshoring”
  : Transfer capacity to ally countries
• China’s Self-Reliance
  : Increase investment in domestic substitution

• NVIDIA H20 chip export to China is restricted; need to pay 15% of China sales to the U.S. government [2]
• Later, H200 chip was allowed to export, but the commission ratio increased to 25% [2]
• Chinese enterprises accelerate the development of domestic AI chips such as Ascend [2]

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• Review scope will further expand to biotechnology, hypersonics, aerospace, and other fields [4][5]
• Greenfield investments are fully included in jurisdiction
• Establish collaborative review mechanisms with allies

• Expand from the current 3 fields to more than 8 strategic industries [4][5]
• More stringent declaration obligations
• Increased penalties for violations

• Complete blockade of advanced processes (below 7nm)
• Upgraded restrictions on AI computing power chips
• Strengthened control of semiconductor equipment and materials

1. Adjust Investment Direction
   : Focus on domestic substitution and localized breakthroughs
2. Optimize Transaction Structure
   : Adopt non-acquisition models such as joint ventures and technology licensing
3. Strengthen Compliance Reviews
   : Pre-evaluate CFIUS risks
4. Diversify Layout
   : Diversify geopolitical risks

1. Accurately Identify Risks
   : Establish a sound CFIUS risk assessment system
2. Utilize “Fast Track”
   : Investors from ally countries can use preferential policies
3. Long-Term Value Investment
   : Focus on basic technology fields not affected by regulation
4. Professional Team Support
   : Hire legal and financial advisors with CFIUS experience

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The Trump administration’s blocking of the HieFo-Emcore transaction is not just an individual case, but a microcosm of the overall stricter CFIUS reviews. This event sends a clear signal to the market:

Cross-border M&A investments in the semiconductor industry are entering a new normal of

. Investors need to:

1. Re-evaluate investment frameworks and risk preferences
2. Adjust M&A strategies and transaction structures
3. Strengthen policy tracking and compliance management
4. Embrace new opportunities under industrial chain reconstruction

Under the dual constraints of “technology breakthroughs and geopolitical games”, the industry will transform from scale expansion to “high-quality breakthroughs”, and investors need to find a new balance between risks and opportunities [6].

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[0] Jinling API Data (EMKR Company Profile, SOXX/SMH ETF Price Data, Sector Performance)

[1] Wall Street Journal - “Trump Blocks Chip Deal Over China Security Concerns” (https://cn.wsj.com/articles/trump-blocks-chip-deal-over-china-security-concerns-c9a8f931)

[2] Guancha.cn - “Trump Strikes Again, Forces ‘China-Linked Company’ to Divest U.S. Chip Assets” (https://www.guancha.cn/internation/2026_01_03_802577.shtml)

[3] King & Wood Mallesons - “Three New Trends in U.S. CFIUS Reviews” (https://www.kwm.com/cn/zh/insights/topic/oversea-interests-protection.html)

[4] King & Wood Mallesons - “Key Takeaways of America First Investment Policy” (https://www.kwm.com/cn/zh/insights/latest-thinking/key-takeaways-of-america-first-investment-policy.html)

[5] Han Kun Law Offices - “Potential Impact of the U.S. America First Investment Policy Memorandum on Chinese Enterprises” (https://hankunlaw.com/portal/article/index/cid/8/id/15035.html)

[6] Caifuhao - “2025 Semiconductor Industry Core Trends and Market Dynamics Report” (https://caifuhao.eastmoney.com/news/20251224225052254132840)

[7] Bloomberg - “Trump blocks HieFo’s acquisition of Emcore semiconductor assets” (https://www.investing.com/news/trump-blocks-hiefos-acquisition-of-emcore-semiconductor-assets-93CH-4428357)

[8] White House Official Website - “Regarding the Acquisition of Certain Assets of Emcore Corporation by HieFo Corporation” (https://www.whitehouse.gov/presidential-actions/2026/01/regarding-the-acquisition-of-certain-assets-of-emcore-corporation-by-hiefo-corporation/)