China is eager to expand its semiconductor industry and will likely continue to look for acquisitions in the United States despite rising tensions between Beijing and Washington over technology and security matters, according to an industry observer.

"China is very interested in the semiconductor industry and that's why they announced a deal to acquire Integrated Silicon Solution Inc. They want to become one of the world's leading semiconductor manufacturers,"Stephen Ezell, director of global innovation and policy at the Information Technology and Innovation Foundation in Washington, told China Daily on Tuesday.

Ezell said China has unveiled a $26 billionprogram to stimulate its domestic semiconductor industry. As semiconductor use continues to rise in China, the country remains dependent on foreign suppliers and would like to have more production at home, he said.

"Clearly their ambition is to transition from being a technology follower to a leader," Jonathan Davis, vice-president of the semiconductor equipment maker trade group SEMI, said in a recent report in the San Jose Mercury News.

Last month, a consortium led by investment funds in Beijing and Shanghai offered to acquire California-based Integrated Silicon Solution for $639 million.The company sells specialty memory chips globally, including to US companies that supply the aerospace industry and military. That means the proposed purchase is likely to trigger a review by Committee on Foreign Investment in the US, or CFIUS, an inter-agency committee that reviews the national security implications of foreign investments in US companies.

Ezell said a CFIUS review or even the possibility of one might give overseas buyers a reason to reconsider a purchase. "It (CFIUS) will certainly make foreign enterprises including the Chinese less likely to target a tech company that serves both the commercial and military markets,"he said.

The US is a leader in semiconductors, the third-largest US export behind airplanes and automobiles, according to the Semiconductor Industry Association (SIA), a trade group. The SIA reported earlier this year that the global semiconductor industry posted record sales totaling $335.8 billion in 2014, an increase of 9.9 percent over 2013.

Despite some recent high-profile spats over US technology companies being removed from recommended purchase lists in China and the Chinese questioning the integrity and security of US technology in the wake of the revelations by Edward Snowden, Ezell said China will probably remain interested in not only US semiconductor companies, but also other tech firms.

"The tensions between China and the US wouldn't necessarily dampen enthusiasm for US firms. To the contrary, it may actually accelerate the Chinese interest because they want to own and operate the technology they are buying,"he said. "To get a good idea of what China may be interested in, consult the 2006-2020 National Medium to Long-Term Plan or MLP. The MLP calls for China to master over 400 technologies ranging from intelligent automobiles to integrated circuits and high-performance computers.”

A year ago, a report from the Rhodium Group and the Asia Society noted that Chinese investment in US high-tech remains modest. By the end of 2013, Chinese investment in 15 high-tech industries amounted to about $9.1 billion, or about one-fourth of total Chinese foreign direct investment in America in the period from the mid-2000s. It's about half of what Facebook offered to pay for the acquisition of messaging startup WhatsApp in 2014.

paulwelitzkin@chinadailyusa.com