U.S. President Donald Trump blocked a Chinese-backed private equity firm from buying a U.S.-based chipmaker Wednesday.

Canyon Bridge Capital Partners’ planned US$1.3 billion acquisition of Lattice Semiconductor Corp. was one of the largest attempted by a Chinese-backed firm in the U.S. microchip sector and was the first announced deal for the buyout fund.

U.S. regulatory scrutiny grew after Reuters reported in November that Canyon Bridge was funded partly by capital from China’s Central Government and had indirect links to its space program.

U.S. defense officials subsequently raised concerns about the Lattice acquisition.

Portland, Oregon-based Lattice makes chips known as field-programmable gate arrays, which allow companies to put their own software on silicon chips for different uses. It said it no longer sells chips to the U.S. military, unlike its two biggest rivals, Xilinx Inc. and Intel Corp.’s Altera.

Trump said in an executive order that Lattice and Canyon Bridge “shall take all steps necessary to fully and permanently abandon the proposed transaction” within 30 days.

Trump’s decision chimes with the views of the Committee on Foreign Investment in the United States (CFIUS), which scrutinizes deals for potential national security threats.

U.S. Treasury Secretary Steven Mnuchin said in a statement following the decision that “the CFIUS and the president assess that the transaction poses a risk to the national security of the United States that cannot be resolved through mitigation.”

China expressed concern about the decision.

“We believe conducting security examinations of investments in sensitive sectors is a country’s legitimate right, but it should not become a tool for advancing protectionism,” China’s Ministry of Commerce spokesman Gao Feng told a press briefing Thursday.

Gao said he hoped the United States could view Chinese firms’ acquisitions objectively and provide fair treatment to what they believe was normal commercial behavior. (SD-Agencies)