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(Reuters) – U.S. President Donald Trump blocked a Chinese-backed private equity firm from buying a U.S.-based chipmaker on Wednesday, sending a clear signal to Beijing that Washington will oppose takeover deals that involve technologies with potential military applications.

Canyon Bridge Capital Partners’ planned $1.3 billion acquisition of Lattice Semiconductor Corp was one of the largest attempted by a Chinese-backed firm in the U.S. microchip sector and was the first announced deal for the buyout fund, which launched last year with a focus on technology investment. U.S. regulatory scrutiny grew after Reuters reported in November that Canyon Bridge was funded partly by capital from China’s central government and had indirect links to its space program.

U.S. defense officials subsequently raised concerns about the Lattice acquisition by a firm backed by the Chinese government.

Portland, Oregon-based Lattice makes chips known as field-programmable gate arrays, which allow companies to put their own software on silicon chips for different uses. It said it no longer sells chips to the U.S. military, unlike its two biggest rivals, Xilinx Inc and Intel Corp’s Altera. Trump said in an executive order that Lattice and Canyon Bridge “shall take all steps necessary to fully and permanently abandon the proposed transaction” within 30 days.

Trump’s decision chimes with the views of the Committee on Foreign Investment in the United States (CFIUS), which scrutinizes deals for potential national security threats.

U.S. Treasury Secretary Steven Mnuchin said in a statement following the decision that “CFIUS and the president assess that the transaction poses a risk to the national security of the United States that cannot be resolved through mitigation.”
Mnuchin added that the national security risk was related to the transfer of intellectual property, the Chinese government’s role in supporting the deal, the importance of semiconductor supply chain integrity to the U.S. government and the U.S. government’s use of Lattice products.

China expressed concern about the decision.

“We believe conducting security examinations of investments in sensitive sectors is a country’s legitimate right, but it should not become a tool for advancing protectionism,” Chinese Commerce Ministry spokesman Gao Feng told a press briefing on Thursday.