U.S. national security officials have advised the president to block Infineon’s planned acquisition of Cypress semiconductor (Cypress Semiconductor), according to people familiar with the matter.

U.S. government officials are concerned that Infineon’s acquisition of Cypress would pose a risk to national security, people familiar with the matter said. German semiconductor maker Infineon tried to negotiate a deal with the U.S. government to allow the deal to go ahead, but the two sides could not reach a deal, one of the people said.

Infineon announced in June last year that it planned to buy Cypress for 9 billion euros, which was expected to become the world’s largest supplier of automotive chips after the merger. U.S. officials are concerned about the acquisition, three sources said. endanger the national security of the United States.

One-third of Infineon’s revenue comes from China. Infineon also tried to negotiate with the U.S. government to make the deal go smoothly, but no agreement was reached. This acquisition has the risk of jeopardizing national security, but interestingly, as long as the advanced US technology falls into the hands of China, it will arouse the nervousness of the Committee on Foreign Investment in the United States (CFIUS). The U.S. Congress gave CFIUS higher powers in 2018 to protect national security, and the committee can directly advise the president to block specific acquisitions.

Infineon said last year that with Cypress’s strong R&D capabilities and important position in the US market, Infineon can not only strengthen its ability to serve important customers in North America, but also enhance its strength in other important regions. The company’s R&D department will occupy a place in Silicon Valley and expand its layout and market share in Japan, a strategic key market.

At the same time, Infineon hopes to make its business model more resilient by realizing huge economies of scale. The deal will make Infineon the eighth-largest chipmaker in the world, based on pro forma revenue of 10 billion euros in fiscal 2018. On the basis of the original power semiconductors and safety controllers, Infineon will become an important chip supplier in the automotive electronics market.

Cypress provides embedded solutions for automotive, industrial, smart home appliances, consumer electronics and medical products worldwide. Cypress’ microcontrollers, wireless and USB connectivity solutions, analog ICs, and reliable and high-performance flash memory help engineers design differentiated products and bring them to market.

Infineon said that the strengths of the two parties in terms of technology product portfolios are highly complementary, which will further expand the company’s market potential in high-growth markets such as automotive, industrial and Internet of Things. The company last year expected the acquisition to generate annual cost synergies of 180 million euros by 2022; in the long-term, annual revenue synergies would reach 1.5 billion euros.

At the close on Friday, Cypress Semiconductor (NASDAQ: CY) shares fell 14.65% to $16.37, with a total market value of about $6.117 billion.

It is worth mentioning that in 2017, Infineon tried to acquire Wolfspeed, the semiconductor unit of US-based Cree Inc., this transaction was also blocked by the Committee on Foreign Investment in the United States (CFIUS).

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