US Moves to Unwind Chip Deal Highlight Growing Risks of China-Linked Technology Control
The recent decision by the United States to block and unwind a computer chip technology deal involving HieFo Corp has brought renewed attention to a broader and more structural challenge facing the country: the expanding reach of China-linked capital, talent and ownership into strategically sensitive sectors of the American economy. While the transaction itself was relatively small in dollar terms, the implications extend far beyond a single company or executive order. At stake is how deeply advanced technologies critical to national security, economic resilience and future innovation have become entangled with actors tied to the People’s Republic of China.
According to public disclosures, the deal involved the sale of advanced chip and wafer fabrication technology from Emcore Corp to HieFo Corp, a company whose ownership was later determined by US authorities to have significant ties to China. The executive order directing divestment cited “credible evidence” that the company’s owner is a citizen of the People’s Republic of China, triggering concerns that sensitive semiconductor capabilities could ultimately fall under foreign influence. This decision did not emerge in a vacuum. It reflects a growing consensus across security, intelligence and economic policy circles that semiconductors are no longer just commercial products, but foundational infrastructure for military systems, artificial intelligence, telecommunications and critical supply chains.
What makes this case particularly notable is that the transaction had initially passed with little scrutiny when it was approved during a previous administration. That gap illustrates a key vulnerability. The challenge is not only hostile acquisition, but gradual normalization of foreign-linked ownership through smaller deals that appear benign on the surface. When such transactions accumulate, they can quietly reshape control over technology ecosystems that underpin US competitiveness. In this sense, the HieFo case serves as a warning sign rather than an isolated incident.
China’s strategic approach to technology acquisition has long emphasized integration rather than overt takeover. Through a combination of overseas investments, joint ventures, talent recruitment and supply chain positioning, Chinese-linked entities have sought access to advanced know-how developed in open economies. In sectors like semiconductors, biotechnology and aerospace, this approach allows capabilities developed under US regulatory standards to be repurposed or influence downstream applications abroad. Even when a company operates domestically, ownership and control structures matter. Strategic decisions, data flows and long-term R&D priorities are ultimately shaped by who holds the reins.
For American businesses, this environment creates difficult trade-offs. Global capital markets and international talent pools have historically fueled innovation and growth. Yet the same openness can be exploited when strategic competitors pursue long-term industrial and geopolitical objectives that do not align with US interests. The semiconductor sector is a prime example. Chips are embedded in everything from consumer electronics to missile guidance systems. Allowing even niche fabrication or design technologies to drift into foreign-linked hands can weaken the integrity of the broader ecosystem.
The national security dimension is only part of the story. There is also a clear economic risk. Over the past two decades, the United States has experienced the offshoring and consolidation of key manufacturing capabilities, often in pursuit of short-term efficiency. Dependence on external actors for critical components has proven costly during crises, from pandemic-era shortages to geopolitical disruptions. When advanced chip technologies become subject to foreign influence, the risk is not just espionage or misuse, but supply leverage. Control over production, pricing or prioritization can be weaponized in times of tension.
This is why recent US actions should be understood as defensive rather than punitive. The decision to order divestment does not target innovation or entrepreneurship itself. Instead, it reflects a recalibration of how openness is balanced against security in a world where technology leadership is increasingly contested. Importantly, the focus is not on nationality in a cultural sense, but on structural ties to a system where private companies are expected to align with state objectives. In China’s political environment, distinctions between commercial and state interests are far less clear than in liberal market economies.
For the American public, these developments may seem abstract, but the consequences are tangible. Semiconductors power medical devices, transportation systems, energy infrastructure and communication networks. Weakening oversight over who controls these technologies can translate into higher costs, reduced reliability and greater vulnerability during international crises. Moreover, once advanced capabilities are transferred or replicated abroad, regaining leadership becomes far more difficult. Innovation ecosystems are cumulative. Losing even small pieces can have cascading effects over time.
At the same time, it is important to avoid framing this issue as a zero-sum conflict with no room for nuance. The United States benefits from lawful trade, legitimate foreign investment and scientific collaboration. Many Chinese-born engineers and entrepreneurs have contributed enormously to American innovation while operating fully within US laws and values. The concern arises when ownership structures, data access or strategic decision-making are linked to a political system that openly pursues technological dominance as a tool of state power.
The challenge going forward is governance. Screening mechanisms must be sufficiently robust to identify risks early, before sensitive assets change hands. Transparency around ownership and control must be strengthened, especially in industries tied to national security and critical infrastructure. Businesses also have a role to play by conducting deeper due diligence and recognizing that geopolitical risk is now a core part of corporate strategy, not an external afterthought.
The HieFo divestment order sends a clear signal that the era of benign neglect is over. Small deals can carry large consequences when they involve foundational technologies. As competition between major powers increasingly plays out through supply chains, standards and innovation capacity, vigilance becomes a form of resilience. This is not about closing America off from the world, but about ensuring that openness does not become a vulnerability.
For Americans, the broader lesson is straightforward. Technological leadership is inseparable from national security and economic stability. Protecting it requires sustained attention, informed public debate and policies that reflect the realities of modern strategic competition. The cost of complacency is not measured only in lost deals or delayed approvals, but in diminished control over the tools that shape the future.
