US restricts certain foreign entities from investing in chips, AI, quantum computing

US President Biden has signed an executive order blocking some foreign entities from investing in critical US organizations.

The order covers investors from “a country of special concern that has a demonstrated or declared strategic goal of acquiring a type of critical technology or critical infrastructure that would affect United States leadership in areas related to national security.” China is not officially named in the EO, but is believed to be the clear target.

The ‘Order on Ensuring Robust Consideration of Evolving National Security Risks by the Committee on Foreign Investment in the United States’ builds on several similar orders and Congressional actions to increase the strength of the Committee on Foreign Investment in the United States (CIFIUS).

The EO gives CIFIUS more powers to block acquisitions or investments that could put the US supply chain at risk.

In particular, it focuses on transactions “within and outside of the defense industrial base, in manufacturing capabilities, services, critical mineral resources, or technologies that are fundamental to national security.”

It lists those as including “microelectronics, artificial intelligence, biotechnology and biomanufacturing, quantum computing, advanced clean energy (such as battery storage and hydrogen), climate adaptation technologies, critical materials (such as lithium and rare earth elements), elements of the agriculture industrial base that have implications for food security, and any other sectors identified in section 3(b) or section 4(a) of Executive Order 14017 of February 24, 2021 (America’s Supply Chains).”

It also covers investments that could pose a cybersecurity risk, and any activity “designed to undermine the protection or integrity of data in storage or databases or systems housing sensitive data.”

The Committee may consider whether a covered transaction may “expose, either directly or indirectly, personally identifiable information, genetic information, or other sensitive data of United States citizens to access by a foreign government or foreign person that may exploit that information in a manner that threatens national security.”

The new EO marks part of a long term shift for CIFIUS to analyze all investments in critical businesses, and not just in deals that give foreign companies a controlling stake in those businesses.

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