U.S. forces divestment by Chinese-owned chip manufacturer of assets of U.S. chip company following CFIUS review of non-notified transaction

Findings

The Order follows a review by CFIUS of a transaction, HieFo's acquisition of certain assets comprising EMCORE's digital chips and related wafer design, fabrication, and processing businesses (the “EMCORE Assets”), that was not originally notified to the Committee. As noted in the Order, HieFo is ultimately controlled by a Chinese citizen. HieFo is based in California and engaged in the design and manufacture of indium phosphide (“InP”) optical chips, with customers across the artificial intelligence, telecommunications, data communications, sensing, and industrial testing markets.

Pursuant to the Order, President Trump determined there was credible evidence to believe that HieFo “might take action that threatens to impair the national security of the United States.” More specifically, a U.S. Department of the Treasury press release published on January 2 in parallel with the Order cited concerns about potential Chinese persons' access to EMCORE's intellectual property, proprietary know-how, and expertise, as well as the possible diversion of InP chips manufactured by EMCORE's digital chips business from the United States.

The transaction subject to CFIUS's review and the Order requiring divestiture of the EMCORE Assets arose from a 2024 “management buyout” transaction, whereby former EMCORE employees formed a company that acquired substantially all of the assets of EMCORE's discontinued chips business line and InP wafer fabrication operations for approximately $2.8 million, according to public information. The newly formed company was named HieFo. The transaction included the transfer of equipment, contracts, intellectual property, and inventory from EMCORE's manufacturing facility in Alhambra, California in addition to the manufacturing facility.

The Order

CFIUS and the President concluded that HieFo's acquisition of the EMCORE Assets presented a national security risk to the United States that could only be mitigated through divestiture of the assets acquired by HieFo. The Order requires that HieFo and any affiliates divest of the EMCORE Assets and effect certain verification and compliance steps in support of the Order.

The key elements and timelines under the Order include:

• Divestment: HieFo, and its affiliates, must divest all interests and rights in the EMCORE Assets, wherever located—including contracts, intellectual property, inventory, parts, fixed assets, and accounts—within 180 calendar days of the order, unless extended by CFIUS.
• Notification of Buyer and CFIUS Non-objection: The Order requires HieFo to inform CFIUS of any proposed buyer or transferee in advance of the sale or transfer of the EMCORE Assets. From the date of notification, CFIUS will have 30 calendar days to review the proposed buyer or transferee and issue an objection to the proposed buyer or transferee.
• Access Restrictions: Until the divestiture is complete, HieFo personnel may not grant access to the EMCORE Assets, or any related non-public technical information, information technology systems, products, parts and components, books and records, or facilities in the United States, to persons who are not personnel of HieFo, unless otherwise approved in writing by CFIUS. The Order requires HieFo to implement measures or controls addressing access restrictions within seven calendar days of the Order.
• Verification and Compliance: HieFo must ultimately verify to CFIUS that it has complied with the Order, including that it has completely transferred all EMCORE Assets following divestiture. Until HieFo has verified that the divestiture is complete to CFIUS's satisfaction, HieFo must provide to CFIUS weekly certifications regarding compliance with the Order and any conditions imposed by CFIUS.

Implications for foreign investments in the United States

• CFIUS continues to emphasize its use of non-notified transaction inquiries: The parties did not notify CFIUS of the transaction in 2024 when it was completed. Instead, CFIUS became aware of the transaction at a later date and chose to request information, and ultimately review and investigate the transaction. CFIUS has increasingly identified and reviewed these types of non-notified transactions. Indeed, according to the 2024 CFIUS Annual Report, CFIUS considered “thousands” of potential non-notified transactions, investigated 98, and opened 76 formal inquiries—a 27% year-over-year increase in new formal inquiries from 2023 to 2024.
• Small deals do not escape scrutiny. The Order underscores that CFIUS scrutiny is not limited to large, high-profile deals. Even relatively small transactions—such as this $2.8 million asset purchase—can trigger national security concerns and lead to divestment requirements. The Order reflects the fact that deal size is not related to the national security risk that may arise as a result of a transaction.  CFIUS will scrutinize transactions regardless of deal size where a transaction may implicate national security concerns. 
• Chinese investments in semiconductors continue to be highly scrutinized. While some may have perceived recent U.S. actions involving Nvidia chip exports as suggesting a more permissive approach to Chinese participation in the U.S. semiconductor sector, the Order serves as an important reminder that Chinese investments in U.S. businesses, especially those involving critical technologies such as semiconductors, remain heavily scrutinized. The Order also appears consistent with the President's February 21, 2025 National Security Presidential Memorandum, which highlights transactions implicating critical technologies and China as deserving more rigorous review.

Authored by Anne Salladin, Brian Curran, Patrick Miller, Zachary Alvarez, and Stephen Finan.