In March 2015, Philips Lighting (Philips) agreed to sell its majority stake in one of its subsidiaries, Lumileds, to GO Scale Capital Co. Ltd., a China-led private equity group. The transaction was originally scheduled to close in the third quarter of 2015, but in October of that year, Philips announced that the Committee on Foreign Investment in the United States (CFIUS) “has expressed certain unforeseen concerns” and that “the closing of the transaction is uncertain.” On January 22, 2016, Phillips announced that it withdrew its notice to CFIUS and terminated the transaction with Go Scale Capital because, “despite the extensive efforts of Philips and Go Scale Capital to mitigate the concerns of CFIUS, regulatory clearance has not been granted.”

The announcement that CFIUS investigated and ultimately blocked the Lumileds sale did not provide any details as to why CFIUS objected to the sale. The discussions between the parties and CFIUS are confidential, and CFIUS does not render any written decisions. CFIUS might have categorized the transaction as one affecting critical infrastructure, given that Lumileds is the biggest supplier of LED lamps to the automotive industry—equipping one out of every three cars in the world—although it is hard to see how having the Chinese as supplier of this product could have harmed critical infrastructure. More likely, it was rejected because the production of LED lamps involves the use of advanced semiconductor technologies that could be deployed in military applications. Reportedly, the acquisition also included an agreement that would transfer more than 600 patents related to LED manufacturing and lighting from Philips to Lumileds, which would have resulted in Lumileds holding one of the world’s largest portfolios of LED-related patents.

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