It’s not every day a $2.9 million chip deal trips the national security alarm… but tensions appear to be at a breaking point.

On Friday, Donald Trump ordered a Chinese-controlled company to unwind its purchase of U.S. semiconductor assets, citing risks related to sensitive chip technology and supply chains. The decision highlights how even relatively small technology deals are now being closely examined amid rising tensions between the U.S. and China.

The White House said in an executive order that HieFo Corporation, a Delaware-based firm controlled by a Chinese national, must divest the chip assets it acquired earlier this year from Emcore. The April 30 transaction included digital chip intellectual property, wafer design and fabrication operations, and a semiconductor manufacturing facility in New Jersey.

According to the Treasury Department, the deal raised several concerns. Officials pointed to the potential for access to Emcore’s proprietary chip technology, specialized expertise, and technical know-how. 

They also flagged the risk that production of indium phosphide chips could be diverted away from the U.S. Indium phosphide is a specialized material used in high-speed communications, sensing equipment, and certain defense applications.

The transaction also drew scrutiny because it was not voluntarily reported for review. Treasury said it was identified by the Committee on Foreign Investment in the United States through its non-notified transactions process, which has become more common as the government increases oversight of foreign technology deals.

Under the order, HieFo has 180 days to divest the assets and must immediately limit access to Emcore’s technical information. Neither HieFo nor Emcore commented on the decision.

Chinese state-linked media criticized the move. Global Times cited an expert who said the order reflects growing concern in Washington over competition with China, arguing the deal’s small size did not justify such action.

HieFo has previously described the acquisition as a stabilizing step. In a September 2024 statement, the company said the deal allowed operations to continue at Emcore’s facility in Alhambra, California, and that it retained nearly all key scientists, engineers, and staff. 

HieFo was founded by Genzao Zhang and Harry Moore through a management buyout and has said it inherited more than 40 years of experience in indium phosphide chip manufacturing.

Emcore’s business helps explain the government’s concerns. The company produces navigation components, including gyroscopes and sensors, used in commercial, industrial, and defense systems such as autonomous navigation and weapons platforms. Emcore was delisted from Nasdaq in early 2025 after merging with aerospace holding company Velocity One LP.

Overall, the decision shows how sensitive semiconductor technology has become. Even small deals involving advanced chip materials, intellectual property, and specialized expertise can now raise national security concerns.

At the time of publishing this article, Stocks.News doesn’t hold positions in companies mentioned in the article.