Security Concerns Unravel Chip Deal: Trump Orders Divestment in Rare Post-Closure Block
In a powerful and unusual move that is shaking up the tech and foreign investment landscapes, former President Donald Trump has issued an executive order demanding the complete unwinding of a completed semiconductor deal, citing critical national security and China-related concerns.
The deal in question involves the $2.9 million acquisition of key computer chip assets from American aerospace and defense specialist, Emcore Corp., by the Delaware-based firm, HieFo Corp.. The transaction, which included Emcore’s digital chips and indium phosphide wafer fabrication operations, was actually finalized back in May 2024, during the tenure of the Biden administration. This makes the new executive order, issued on a recent Friday, an especially rare occurrence: the forced divestment of a deal that had already closed and been in effect for over a year.
President Trump’s order is not mincing words about why this step is necessary. It states that there is “credible evidence” that HieFo, which is organized and controlled by a citizen of the People’s Republic of China, poses a threat to US national security.
A Focus on Advanced Technology
The heart of the dispute lies in the specific technology involved. Emcore’s operations include the manufacturing of sophisticated indium phosphide (InP) chips. These are not your everyday semiconductors; InP technology is highly valued for its performance in complex applications, particularly those tied to advanced artificial intelligence (AI) and, crucially, military systems.
The Committee on Foreign Investment in the United States, or CFIUS, which reviews foreign deals for national security risks, determined that the transaction created two major vulnerabilities. First, it risked giving a Chinese-controlled entity access to Emcore’s valuable intellectual property and proprietary know-how. Second, it raised the specter of “diversion of supply” of those vital indium phosphide chips away from the United States.
“The national security of the United States requires that the transaction be prohibited,” the executive order declared, forcing HieFo to fully divest all interests and rights in the Emcore assets, including equipment, IP, and contracts.
The Divestment Mandate
HieFo now has 180 calendar days to complete the divestment, though the deadline can be extended by CFIUS. The order places the Committee firmly in the driver’s seat for the transition. The regulatory body will be responsible for verifying compliance, approving any potential new buyers, and even retaining the right to access HieFo’s US premises to ensure the order is being followed.
For Emcore, an aerospace and defense specialist that sold off a discontinued chips business line, and HieFo, a company whose CEO was a former Emcore vice president, the reversal creates immediate business uncertainty. As of the announcement, HieFo did not immediately comment on the order, leaving the fate of its $2.9 million investment and its plans for AI-related technology completely up in the air.
This forceful action marks a significant escalation in the ongoing, high-stakes technology rivalry between the US and China. It signals a hardline stance that national security concerns will supersede even completed business transactions involving sensitive American technology.