Overview
Trump just blocked a $2.9 million chip deal that had already closed 20 months ago. On January 2, 2026, he ordered HieFo Corporation—a Delaware company controlled by Chinese national Genzao Zhang—to unwind its acquisition of EMCORE's indium phosphide semiconductor business and divest completely within 180 days. The transaction wasn't even on CFIUS radar when it closed in April 2024. But the chips HieFo acquired power navigation systems in missiles, submarines, and autonomous weapons—exactly the technology Washington is desperate to keep out of Beijing's hands.
This is the latest strike in a nine-year technological cold war. Since Trump's first term, presidents have used CFIUS to systematically block Chinese access to American semiconductor technology, from billion-dollar deals to management buyouts. The stakes: whether China can build its own advanced military navigation systems or remains dependent on Western suppliers. HieFo claims it's an American company with American management. CFIUS sees a Chinese citizen controlling critical defense technology through a corporate shell.
Key Indicators
People Involved
Organizations Involved
The interagency committee that reviews foreign acquisitions of US companies for national security risks.
A Delaware-incorporated semiconductor company controlled by Chinese national Genzao Zhang, now at the center of a forced divestment order.
The world's largest independent provider of inertial navigation solutions to aerospace and defense, which sold its chip division to HieFo.
Timeline
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Treasury Confirms National Security Findings
StatementTreasury detailed CFIUS findings: risk from potential access to EMCORE IP and diversion of indium phosphide chip supply from US defense customers.
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Trump Orders HieFo Divestment
Presidential ActionTrump signed executive order blocking HieFo's ownership of EMCORE assets and ordering complete divestment within 180 days, citing IP access and supply diversion risks.
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China Suspends Critical Minerals Export Ban
DiplomacyChina paused export ban on gallium, germanium, and antimony to US through November 2026 as part of trade truce.
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Trump-Xi Trade Truce Announced
DiplomacyTrump and Xi struck deal in South Korea to delay new semiconductor tariffs until mid-2027, seeking to stabilize US-China tech tensions.
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Biden Tightens Semiconductor Export Controls
PolicyBiden expanded China chip controls, adding 140 companies to Entity List and restricting high-bandwidth memory and packaging equipment. China immediately banned gallium, germanium, and antimony exports to US.
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Treasury Expands CFIUS Enforcement Powers
RegulatoryTreasury issued final rule enhancing CFIUS authority to review historical deals and enforce compliance, effective December 26, 2024.
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HieFo Begins Operating Semiconductor Facility
OperationsZhang and Moore officially started as HieFo CEO and co-founder, taking control of EMCORE's manufacturing facility and intellectual property.
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HieFo Acquires EMCORE Chip Business
TransactionGenzao Zhang and Harry Moore completed $2.92 million management buyout of EMCORE's indium phosphide semiconductor operations in California.
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China Retaliates With Critical Minerals Ban
RetaliationChina imposed export restrictions on gallium and germanium—semiconductor materials the US doesn't domestically produce—following US chip controls.
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Biden Imposes Sweeping Semiconductor Export Controls
PolicyBiden administration restricted exports of advanced chips, chipmaking equipment, and design tools to China to impair AI and supercomputing capabilities.
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Trump Blocks First Chinese Chip Acquisition
Presidential ActionTrump blocked Canyon Bridge's $1.3 billion acquisition of Lattice Semiconductor, citing Chinese government funding and IP transfer risks. Only fourth presidential CFIUS block in history.
Scenarios
HieFo Divests, EMCORE Reclaims Assets
Discussed by: Legal analysts at Morrison Foerster and trade compliance experts
HieFo completes full divestment within 180 days, returning the semiconductor facility, IP, and operations to EMCORE or selling to a US buyer. This is the most likely outcome given presidential orders carry the force of law and non-compliance risks criminal penalties. EMCORE could resume chip production or find a US buyer for the division. The case becomes a precedent warning that even small management buyouts face retroactive CFIUS review if foreign nationals control defense-critical technology. Zhang returns to China or remains in US without the business; HieFo potentially challenges the decision in court but ultimately complies.
Legal Challenge Delays Divestment
Discussed by: CFIUS legal practitioners and constitutional law experts
HieFo sues to block the order, arguing it operates as an American company under American management and the Chinese control finding is wrong. The company seeks injunctive relief claiming the 180-day timeline is unreasonable and the order exceeds presidential authority. Canyon Bridge attempted similar challenges in 2017 and lost. Courts historically defer to presidential CFIUS determinations on national security grounds. Even if HieFo wins a temporary delay, the underlying national security concerns remain and divestment becomes inevitable. The case drags through 2026 with the facility in operational limbo.
Trade War Escalates, China Retaliates
Discussed by: China analysts at CSIS and international trade economists
Beijing views the HieFo block as violation of the Trump-Xi trade truce and retaliates by reimposing critical minerals export bans or targeting American companies operating in China. The semiconductor cold war intensifies despite the October 2025 deal to stabilize relations. China accelerates domestic indium phosphide production to replace lost EMCORE supply chain access. Washington responds with additional CFIUS enforcement actions against completed deals involving Chinese investors. The fragile détente collapses, triggering the mid-2027 semiconductor tariffs early and potentially derailing broader trade negotiations. Both sides dig in for protracted technological decoupling.
Historical Context
Canyon Bridge-Lattice Semiconductor (2017)
2017What Happened
Trump blocked a $1.3 billion Chinese state-backed buyout of Lattice Semiconductor, a US chipmaker, after CFIUS found national security risks from IP transfer and Chinese government funding. Canyon Bridge was a private equity fund created specifically to minimize CFIUS scrutiny, with China Reform Holdings as sole investor. CFIUS determined this was a cover transaction that couldn't obscure Chinese state control. The parties refiled their CFIUS notice three times attempting to address concerns before Trump ultimately ordered abandonment within 30 days.
Outcome
Short term: Deal collapsed; Lattice remained independent and US-controlled.
Long term: Became the template for aggressive CFIUS enforcement against Chinese semiconductor acquisitions, establishing that complex corporate structures won't hide ultimate control.
Why It's Relevant
The HieFo case follows the same playbook: a small Delaware company created to acquire US chip assets, but with Chinese control CFIUS sees through. Like Canyon Bridge, HieFo's American incorporation didn't matter—control is what counts.
Obama Blocks Ralls Wind Farm (2012)
2012What Happened
President Obama ordered Ralls Corporation, owned by Chinese executives, to divest wind farm projects near restricted Navy airspace in Oregon. This was only the third presidential CFIUS block in history. Ralls sued claiming the order violated due process, marking the first constitutional challenge to a CFIUS presidential determination. The DC Circuit Court upheld presidential authority but required better process for disclosing unclassified evidence.
Outcome
Short term: Ralls divested the projects; legal challenge failed to overturn the order.
Long term: Established that presidential CFIUS determinations are reviewable but courts defer heavily on national security findings. Set precedent that proximity to military installations triggers intense scrutiny.
Why It's Relevant
Shows that Chinese investors challenging presidential CFIUS blocks lose in court. If HieFo litigates, history suggests they'll fail. Also demonstrates CFIUS has no statute of limitations—even completed deals can be unwound.
MineOne Cryptocurrency Mining Divestment (2024)
2024What Happened
Biden's CFIUS forced Chinese-owned MineOne to divest cryptocurrency mining operations near a strategic missile base in Wyoming. The facility operated for two years before a public tip alerted CFIUS, which launched a non-notified transaction investigation. The case revealed CFIUS's expanding focus beyond traditional tech acquisitions to any foreign investment near critical infrastructure, and its reliance on tips to discover unreported deals.
Outcome
Short term: MineOne divested the Wyoming real estate and mining operations.
Long term: Signaled that CFIUS will aggressively investigate historical transactions not voluntarily disclosed, and geography near military sites remains a red flag regardless of business sector.
Why It's Relevant
Like MineOne, the HieFo deal wasn't voluntarily disclosed to CFIUS and faced retroactive investigation. Both cases show CFIUS's 2024-2025 enforcement surge targeting non-notified transactions years after closing.