CFIUS Strikes Again: President Trump Orders Divestment of HieFo–EMCORE Deal

The EO follows an investigation of the transaction by the Committee on Foreign Investment in the United States (CFIUS). According to the US Department of the Treasury’s statement accompanying the EO, HieFo did not notify CFIUS of the transaction until after CFIUS had identified it through its non-notified transaction monitoring program.

According to the EO and accompanying statement, the transaction gave HieFo, a company allegedly controlled by a Chinese national, potential access to intellectual property, proprietary know-how, and expertise related to indium phosphide chips. The transaction also created the risk of potential diversion of supply of such chips away from the United States.

The EO requires that HieFo, its affiliates, and foreign-person shareholders divest all interests and rights in EMCORE’s digital chips assets, including contracts, inventory, tangible property, parts, fixed assets, accounts receivable, permits, real property leased or owned by EMCORE, and intellectual property. The divestment must be completed within 180 calendar days unless an extension of time is granted by CFIUS.

Under the EO, HieFo must certify to CFIUS on a weekly basis that it and its affiliates are compliant with the EO and any conditions imposed by CFIUS. The certification must also describe efforts to effectuate the divestment and a timeline for projected completion of remaining actions. In addition, the EO authorizes CFIUS to inspect HieFo’s records, systems, and US facilities, and to impose auditing requirements to ensure compliance with the EO, any conditions imposed by CFIUS, and the ordered destruction or transfer of EMCORE’s intellectual property.

Background

CFIUS is an interagency committee of the US government chaired by Treasury, which reviews foreign investments in US businesses to assess national security risks. The Committee’s screening program allows for voluntary disclosures of inbound foreign investments but also requires mandatory filings for certain transactions involving critical technologies or substantial foreign government interests.

Crucially, the president can block, unwind, or impose mitigation requirements on transactions subject to CFIUS jurisdiction at any point, even many years after closing, if CFIUS identifies national security risks arising from the transaction. On the other hand, clearing the Committee’s screening process guarantees safe harbor against any such blocking or unwinding going forward (albeit sometimes with a mitigation plan in place).

Takeaways for Foreign Investors and Target Companies

This EO showcases the (indefinite!) risks associated with failing to submit a CFIUS filing for high-risk transactions. Transaction parties should bear in mind the following key takeaways.

• Investments and acquisitions by foreign entities, or entities controlled by foreign entities, should be carefully reviewed to determine whether CFIUS has jurisdiction. In cases where CFIUS does have jurisdiction, CFIUS maintains the right to investigate non-notified transactions (and potentially order divestment, unwinding, or imposing mitigating measures). Here, although the acquisition was completed on April 30, 2024, the divestment was ordered nearly two years later.

• Due diligence on foreign buyers and investors is critical. The Trump Administration is likely to continue to focus on transactions involving Chinese owned or controlled entities, including in critical or sensitive sectors such as semiconductors.

• According to CFIUS’ 2024 annual report, CFIUS used various methods to identify non-notified and non-declared transactions in 2024, including interagency referrals, tips from the public, classified reporting, media reports, voluntary self-disclosures, congressional notifications, and multiple commercial databases. High profile investments reported on in public media outlets are especially likely to draw attention.