Global Trade & Foreign Policy Insights

On June 21, 2024, the U.S. Department of the Treasury’s (Treasury) Office of Investment Security released proposed language for the Outbound Investment Security Program (hereafter, the Proposed Rule).

As a resource to our clients, our global team—which includes attorneys resident in China—has designed a mini-series of presentation recordings outlining recent international trade updates between the U.S. and China in key areas. 

Earlier this month, on August 9, 2023, the Biden administration issued its long-awaited Executive Order (the E.O.) announcing new restrictions on the ability of U.S. persons to invest in Chinese companies developing certain types of sensitive technologies and products. The new E.O., titled “Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern,” directs the U.S. Department of the Treasury (Treasury) to issue regulations that will either prohibit or require notification of outbound investments in Chinese companies undertaking identified activities relating to certain products and technologies in the following three industry sectors: (1) semiconductors and microelectronics, (2) quantum information technologies, and (3) artificial intelligence.

With the ink barely dry on the October 7, 2022 Export Administration Regulations (“EAR”) advanced semiconductors and supercomputing interim final rule (the “Semiconductor IFR”), the U.S. Department of Commerce (“Commerce”) continues to pull multiple levers in a bid to fundamentally change the trajectory of global advanced semiconductors manufacturing in the United States’ (“U.S.”) favor.

Over are the days of carefree selling to and offshoring supply chains through China for leading-edge semiconductors and the technologies and equipment used to produce them. On October 7, 2022, the U.S. Department of Commerce’s (“Commerce”) Bureau of Industry and Security (BIS) announced surgically precise and novel export controls targeting China’s[1] semiconductor and advanced computing industries. According to the BIS Press Release, the new controls will restrict China’s ability “to produce advanced military systems including weapons of mass destruction; improve the speed and accuracy of its military decision making, planning, and logistics, as well as of its autonomous military systems; and commit human rights abuses.”

On the heels of President Biden signing into law the CHIPS and Science Act of 2022, the Department of Commerce recently launched a new website at CHIPS.gov to publish information relating to the CHIPS Act.

President Biden recently signed into law the CHIPS and Science Act of 2022, which, among other things, provides billions of dollars of federal financial assistance to semiconductor companies to construct, expand, and modernize semiconductor manufacturing facilities in the United States.

As predicted, and addressed in a previous client alert, Chinese private equity (PE) firm Wise Road Capital and U.S.-based Magnachip Semiconductor Corp. (Magnachip) terminated their billion dollar-deal after failing to receive approval from the Committee on Foreign Investment in the United States (CFIUS).

In an earlier client alert, we noted that Wise Road Capital’s proposed acquisition of Magnachip Semiconductor Corporation was on life support: the Committee on Foreign Investment in the United States (CFIUS) had issued a Due Process letter, and the transaction parties could either abandon the transaction or allow the matter to be referred to the President, who would likely block it. 

Earlier this year, Wise Road Capital, a Chinese private equity firm, entered into an agreement to purchase Magnachip Semiconductor Corporation, a South Korean chip manufacturer. On August 27, 2021, Magnachip submitted an SEC filing indicating that the Committee on Foreign Investment in the United States is preparing to block the deal.

Tyler McGaughey lists 17 things that dealmakers need to know about CFIUS and semiconductors.