Despite the concerns of intelligence agencies, Germany’s government is ready to accept the purchase of a German semiconductor manufacturing site by a Chinese firm.

The transaction would see Sweden’s Silex — a fully owned subsidiary of China’s Sai Microelectronics — acquire the semiconductor operations of Dortmund-based Elmos. Insiders told Handelsblatt that the government is likely to approve the deal. The acquisition could be finalized within the coming weeks.

Europe’s struggle with unsavory trade partners continues

The European Union, and Germany in particular, has been struggling with reliance on autocratic countries to access critical infrastructure after its Russian energy dependence was exposed following Putin’s war on Ukraine.

The update on Elmos’ pending acquisition comes only days after the German government approved Chinese state-owned shipping firm Cosco’s purchase of a stake in a Hamburg container port. German Chancellor Olaf Scholz disregarded not just EU warnings, but also those of six of the country’s federal ministries, including the Greens’ Vice Chancellor Robert Habeck.

Elmos is a minor German semiconductor company that primarily manufactures chips for the automobile sector. Silex intends to purchase the facility for €85 million. Elmos will utilize the cash to discontinue proprietary manufacturing and instead process chips purchased from contract manufacturers.

German intelligence services oppose the move

The German government claims that Elmos’s technology is outdated and that no critical intellectual property will be transferred to China.

German intelligence services see things differently. They expressed concerns about China’s systematic expansion of chip production capacity and knowledge.

Several authorities recommended the government veto the sale, according to Handelsblatt. The president of the Federal Intelligence Service (BND) recently cautioned that China is purposefully investing in vital industries to increase leverage over other countries.

Tip: ‘Apple halts deal to acquire Chinese chips amid export restrictions’