German ministry seeks to block Chinese chip factory takeover

In a signal of deepening cracks inside Germany's ruling coalition, Economy Minister Robert Habeck on Tuesday submitted a proposal for the government to block the sale of Dortmund-based microchip factory Elmos. 

The development follows apparent discord in the Cabinet over the degree of reliance that Germany has on Beijing. 

What do we know so far?

Sweden-based Silex, a unit of Chinese company Sai MicroElectronics, is seeking to take over the chip firm Elmos.

Silex is seeking to buy the Elmos site for some €85 million (just under $85 million). The move could see the German firm end production and simply sell Silex-made chips to its clients.

However, Germany's Federal Ministry for Economic Affairs and Climate Action, headed by Green Party politician Habeck, is against the sale. A source at the ministry told the AFP news agency that the acquisition would "constitute a threat to public order and... security."

"The ministry has therefore suggested that the federal cabinet prohibits the acquisition of Elmos," the source was cited as saying.

Germany's domestic intelligence agency has also reportedly cited concerns, even though the German firm's technology is not reported to be state-of-the-art. 

Habeck is reportedly critical of takeovers in the field of semiconductor manufacturing and chip production. The sector is particularly sensitive, with German automakers badly hit last year by a global shortage of chips because of supply chain problems.

What's the background?

A split in the Cabinet about overreliance on China emerged notably over the sale of part of the port of Hamburg to Chinese state shipping company Cosco. 

Center-left Social Democrat Chancellor Olaf Scholz defied calls from six ministries — citing security concerns — to veto the sale, instead allowing Cosco to purchase a reduced stake. Both the Green Party and the neoliberal Free Democrats, junior coalition members, had expressed opposition to the sale in its original form.

Eventually, the sale to Cosco was approved in a compromise arrangement that saw the Chinese giant able to acquire a stake of just 24% compared with the planned 35%.

Habeck and other ministers from the two junior coalition parties have warned that it is unwise to make Germany more dependent on China at a time when it is weaning itself off energy imports from Russia.

German President Frank-Walter Steinmeier, a member of Scholz's Social Democrats, has said Germany must "learn lessons" from the stand-off with Moscow. Steinmeier has himself faced criticism for pursuing closer economic ties with Moscow during his time as Germany's foreign minister.

rc/dj (dpa, AFP)