Germany likely to block sale of domestic semiconductor company Elmos production facilities to China

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The German government has decided to ban the sale of production facilities owned by its domestic semiconductor company Elmos to China.

According to Bloomberg and other sources on the 8th (local time), Elmos stated in a press release the day before that the German Federal Ministry for Economic Affairs and Climate Action (BMWK) ministerial meeting scheduled for the 9th will discuss the proposal to sell production facilities to China, and it is highly likely that this proposal will be banned.

Robert Habeck, Germany's Vice Chancellor and Minister for Economic Affairs and Climate Action, is expected to propose a measure to prohibit the sale of Elmos-owned production facilities to China. Ministry insiders said that he was fundamentally critical of overseas sales of semiconductor factories and that approving such a sale would threaten Germany's public safety and order.

Elmos is a company that mainly develops, produces, and distributes semiconductors for automobiles. Last year, the company announced plans to sell its semiconductor wafer production facility in Dortmund to Silex, a Swedish subsidiary of the IT company Sai Group linked to the Chinese government, for 85 million euros (approximately 118 billion KRW). Since then, the German Ministry of Economic Affairs has been reviewing whether to approve the sale.

The issue of Elmos' production facility sale has attracted attention recently due to fierce controversy in Germany over China's expanding influence on domestic infrastructure and industries. Despite opposition from the responsible ministries, German Chancellor Olaf Scholz allowed the Chinese state-owned shipping company China Ocean Shipping Company (COSCO) to acquire a stake in Germany's largest port, the Port of Hamburg. The stake was limited to 24.9%, not the previous 35%. In contrast, foreign media reported that the government appears to have reached an agreement to ban the sale related to Elmos.

Governments of major countries such as the United States and Europe closely monitor the overseas sale of production facilities of semiconductor companies that incorporate advanced technologies. In particular, major countries are intensifying their vigilance to prevent their domestic semiconductor companies from falling under China's expanding influence as it seeks semiconductor dominance. One example is the U.S. government's blocking of the acquisition of MagnaChip Semiconductor by Chinese capital last year. Currently, the UK is also reviewing national security issues regarding the contract made by Nexperia, a Dutch semiconductor company with majority Chinese ownership, to acquire the Newport wafer fab in the UK.