Of dual-use tech and Chinese smuggling attempts

Article By : Junko Yoshida

In 2012, two Chinese nationals were indicted trying to purchase military-grade Lattice PLDs. Although Lattice no longer offers such products, it does not mean it possesses no dual-purpose technology.

« Previously: Testy ties: Why Lattice deal may hit a snag

The second question on the Lattice case is whether technology gained through the purchase of Lattice could be used by China's military.

Rob Lineback, senior market research analyst at IC Insights, told EE Times that Lattice was supplying programmable logic devices to defence and aerospace contractors earlier (at least until the 2010-2012 timeframe).

Lineback referred to an FBI case in 2012. Two Chinese nationals were indicted after a New York sting operation involving the purchase of military-grade PLDs.

The 12-count indictment charged the two Chinese with conspiracy to “violate the Export Administration Regulations and smuggle goods, conspiracy to commit money laundering, and 10 counts of money laundering in connection with an attempt to obtain dual-use programmable logic devices (PLDs), which are manufactured by Lattice Semiconductor Corporation of Hillsboro, Oregon, to perform at extended temperature ranges and tested to military specifications,” according to the FBI file.

Lineback also pointed out, “In an old 2010 corporate presentation, Lattice showed it served automotive/military applications in radar/sonar, secure communications, and navigation systems, along with telematics, infotainment, and ‘body/convenience’ applications.”

However, in January 2012, Lattice announced an agreement to transfer its SMD (standard military drawing) product line to Arrow Electronics. Lineback explained, “These products included simple and complex PLDs. In 2011, Lattice had given notice of discontinuing these military PLDs.”

Today, Lattice is said to offer no products for military/defence markets. But this doesn’t necessarily prove that it possesses no dual-purpose technology.

Lineback noted, “Lattice is involved in a lot more than programmable logic these days, especially after it acquired Silicon Image for ₹4,043.73 crore ($606.6 million) in 2015. That acquisition gave Lattice additional wireless and communications technology and IC products, including Silicon Image's SiBEAM subsidiary, which was pursuing millimetre wave technology.”

He added, “There seems to be the potential for sensitive technology in Lattice's current push into advanced high-speed communications and millimetre wave technologies. This could involve 5G cellular and IoT.”

In Lineback’s opinion, “The U.S. may see these as areas for protection of national interests, especially with all the news about threats of hacking ‘things’ and risks to Internet security.”

Of course, a wild card in any acquisition involving foreign companies and governments, Lineback noted, is “how the new Trump Administration will view semiconductor M&A deals. We certainly have an added degree of uncertainty being tossed into the mix going forward.”

Pending review

CFIUS, made up of the Treasury Department, Defence Department and other agencies, must approve any deal that could harm national security.

It’s not mandatory for the parties involved in such investments to file a notice with CFIUS. “However, if such a notification is not filed, and subsequently CFIUS determines that the transaction raises U.S. national security or critical infrastructure concerns, CFIUS has the authority to unwind the transaction,” according to Baker Botts L.L.P., a Huston-based international law firm.

It isn’t clear if Lattice and Canyon Bridge have already filed with CFIUS. Lattice would not comment, other than referring to the company’s original announcement. The press release said, “The transaction is expected to close in early 2017 subject to customary closing conditions, regulatory approvals and approval by Lattice’s shareholders. Lattice and Canyon Bridge are committed to proactive engagement with regulators to facilitate the government review process.”

Meanwhile, a source close to Lattice told EE Times that Lattice and Canyon Bridge would disclose all sources of Canyon Bridge's capital in filings with U.S. regulators. Watch for the proxy statement on the proposed Lattice bid, which will have more details of the offer, the source said. That proxy statement has yet to be filed.

Canyon Bridge did not return a call from EE Times by press time.

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