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Is The Cypress-Infineon Deal a National Security Threat?

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Could an $8.7 billion deal between two chipmakers be a national security threat? 

Shares of defense-focused chipmaker and designer Cypress Semiconductor (CY) - Get Report plunged on Friday following reports that U.S. national security officials are recommending President Donald Trump block Infineon Technologies proposed takeover of the company.

According to reports, the Committee on Foreign Investment in the United States called CFIUS, is concerned that Infineon’s takeover of Cypress poses a risk to national security.

It wasn’t clear why CFIUS officials, which review foreign takeovers of U.S. businesses, see it that way. The panel, however, is particularly sensitive to any transaction that could allow Chinese buyers to get their hands on advanced U.S. technology.

Cypress, based in San Jose, sells components and designs to the defense industry, although its products are not considered particularly sensitive. Infineon, based in Neubiberg, Germany, generates a large portion of its sales from China. 

Regardless of whether the president approves the deal or not, investors voted with their feet, sending Cypress shares down almost 12% on Friday after ending the day Thursday down more than 17%.

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