It is also expected to recommend steps to limit China's ability to buy its way into a position of prominence in the global semiconductor industry.
The report is being prepared by John Holdren, chief science advisor to President Obama, and will be delivered before he leaves office this month, the WSJ said. The report could provide a blue-print for the incoming Trump administration to be more assertive in resisting Chinese efforts to gain prominence.
It will recommend protection of the semiconductor industry because it is critical to national security, the report said referencing unnamed sources. This could include the recommendation that the Committee on Foreign Investment in the United States (CFIUS) take a tougher stance on investments in companies of strategic interest to the US.
CFIUS considers mergers, acquisitions and investments for their impact on US national security and in the past the notification of an investigation was often itself enough to dissuade protagonists because of the significance of the US market. In 2016 CFIUS ruled against the takeover of metalorganic chemical vapor deposition (MOCVD) equipment vendor Aixtron SE by China-controlled Grand Chip Investment GmbH.
Another deal that may be impacted by increased scrutiny from CFIUS is the sale of FPGA vendor Lattice Semiconductor Corp. (Portland, Ore.) to a newly-formed private equity company called Canyon Bridge Capital Partners Inc. (Palo Alto, Calif.). Canyon Bridge has received its initial funding from partners in China.
However, the report may go further than calling for the more frequent banning of takeovers. There are cases to be considered where China takes minority stakes and questions over the licensing of technology to Chinese companies, something that has been happening increasingly over recent years.
The WSJ quoted US Commerce Secretary Penny Pritzker as saying: "We will not allow any nation to dominate this industry and impede innovation through unfair trade practices and massive, non-market-based state intervention."
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