(ATF) The Italian government has intervened to halt the sale of a semiconductor equipment supplier to a Chinese buyer.
A cabinet meeting on March 31 used its special vetting powers to block Shenzhen Investment Holdings from buying a controlling stake in Milan-based LPE, which produces components for power electronics applications.
"There was a case recently in which the government looked into ... an Italian semiconductor company which was to be acquired by a Chinese company,” said Prime Minister Mario Draghi. “It was blocked."
Global technology industries are reeling from a shortage of semiconductors caused in part by the coronavirus pandemic as it holds up supply chains and prompts the diversion of chip supplies to personal and office computer systems.
“Demand for consumer electronics surged during the pandemic as millions of people were forced to work and study from home,” said Cao Yishan, credit analyst at PIMCO. “At the same time, demand for automotive chips declined as orders for new cars fell.”
As a result, semiconductor foundries shifted capacity to consumer products, which has particularly hit the European vehicle sector.
"The shortage of semiconductors forced many automotive manufacturers to slow down production last year. This is a sector deemed of strategic importance," Draghi said.
EXACERBATED BY SANCTIONS
China’s technology industry, one of the world’s largest, has been hit hard by the shortage, exacerbated by US sanctions on advanced equipment sales.
“Most Chinese chip manufacturers rely on US software and machinery to fabricate semiconductors,” said Cao. “Following the imposition of US government restrictions on technology exports to China in 2019, Chinese companies started stockpiling chip inventory, contributing to the shortage.”
Chen Shihua, a senior executive at the China Association of Automobile Manufacturers, said the industry body expects the chip supply shortage to have a major impact on China's automotive production this year.
Italy has so far used its veto three times since 2012 to block unwanted foreign interest in key industries.
Last year, under previous prime minister Giuseppe Conte, Rome prevented telecoms group Fastweb from signing a deal with Huawei to supply equipment for its 5G network.
Italy's cabinet takeover veto applies to the financial, credit, insurance, energy, transport, water, health, food safety, robotics, semiconductor and cybersecurity sectors.
With reporting by Reuters