Aixtron considers partial sell-off after Chinese deal blocked

FRANKFURT German semiconductor chipmaking machinery company Aixtron (AIXGn.DE) is considering reducing the size of the business with a partial sale, its chief executive said in an interview published on Friday, opening the door for bidders after a deal with a Chinese firm collapsed.

“There are two options: First, we could hope that the markets for our products recover and continue investing high sums in new equipment. But that would come with high development and ramp-up costs, and risks,” Martin Goetzeler told German daily Handelsblatt in an interview published on Friday.

“Or Aixtron could shrink, divest technologies and continue with a specialized offering,” he said.

China’s Fujian Grand Chip Investment Fund dropped its 670 million-euro ($712 million) takeover bid for Aixtron on Thursday, after the United States blocked the deal on security grounds.

The crux of the issue for Aixtron is that it makes devices which produce crystalline layers based on gallium nitride that are used as semiconductors in weapons systems.

Its technology is being used to upgrade U.S. and foreign-owned Patriot missile defense systems and the U.S. Treasury said the deal had been blocked due to national security risks.

China’s Ministry of Commerce (MOFCOM) criticized the United States on Friday for thwarting the deal. “The U.S., in the name of national security, frequently departs from market and commercial principles to interfere with normal business activity,” an MOFCOM spokesman said.

INVESTOR NEEDED

Goetzeler put a positive spin on the collapse of the deal, saying the U.S. blocking of the takeover has highlighted the German firm’s importance in the sector.

“Aixtron is of central interest both to Germany and to the United States, the world’s leading economy. If we needed more proof that our products have intrinsic value, we have it now,” he said.

But analysts have said Aixtron future as a stand-alone company looks bleak as it struggles to compete in an overcrowded market where Chinese companies call the shots.

“Aixtron’s management has to find other financial or strategic investors in order to maintain its strategy of heavily investing in future technologies like OLED (organic light-emitting diodes),” DZ Bank analyst Harald Schnitzer said.

Goetzeler said the German government had indicated a willingness to help Aixtron where it can, for example by giving Aixtron a central role in an investment program for the micro-electronics sector.

(Reporting by Maria Sheahan; Editing by Greg Mahlich)