The Infineon logo can be seen on a chip on the board of a microcontroller kit at the Infineon Annual General Meeting in the Congress Center of the Munich Exhibition Center. Infineon is seen as one of Europe's key technology firms in the semiconductor space. Matthias Balk | picture alliance | Getty Images

Europe has long been an attractive place for Chinese firms looking to invest and acquire — and the recent bout of weakness in stocks, particularly in key tech firms, could further pique their interest. According to one analyst, some of Europe's key tech firms are "vulnerable" given the market slump, but a top politician in the European Union has urged countries to take a stake in those companies to stop the Chinese takeovers. The outbreak of the coronavirus in China, which has spread across the world, has led to a slump in share prices around the world. Some European tech firms that are part of industries seen as strategic, such as telecommunications or semiconductors, have taken a hit this year.

Europe is vulnerable because the continent is lagging behind both China and the U.S. in both economic growth and innovation. Neil Campling Mirabaud Securities

Finnish networking equipment-maker Nokia is down over 9.6% year-to-date. Its rival Ericsson has fallen 2%. Meanwhile, chip firms Infineon and STMicro have dropped 20% and 7.5% respectively. "I would say that Europe is vulnerable because the continent is lagging behind both China and the U.S. in both economic growth and innovation," Neil Campling, head of technology, media and telecoms research at Mirabaud Securities, told CNBC. "China has long used a policy of 'buy it is quicker than building it' to scale quickly and will certainly be thinking that recent disruptions and lower market values might present opportunities."

Chinese takeovers in Europe

Chinese companies have made notable acquisitions and investments in European technology firms. In 2016, Chinese tech giant Tencent bought a majority stake in Finnish mobile games maker Supercell and Midea, a Chinese electrical appliance manufacturer, bought German robotics firm Kuka. And last year, Ant Financial, the financial technology affiliate of Alibaba, bought U.K.-based currency exchange WorldFirst. But scrutiny of Chinese takeover attempts have increased recently, particularly in the U.S. through the Committee on Foreign Investment in the United States, or CFIUS. It has blocked Chinese companies that attempt to acquire American firms, especially those seen in key technology areas. One example was in 2018, when CFIUS blocked American semiconductor testing company Xcerra's takeover by China's Hubei Xinyan. And in January, CFIUS gained increased powers to scrutinize deals for national security threats.

That heightened worry about Chinese acquisitions is now playing out in Europe. Margrethe Vestager, the European Union's (EU) competition commissioner, suggested in an interview with the Financial Times that was published on Monday, that countries should consider taking stakes in companies to fend off the threat of a Chinese takeover. "We don't have any issues of states acting as market participants if need be — if they provide shares in a company, if they want to prevent a takeover of this kind," Vestager said. Against this backdrop is the U.S.-China trade war, which is also a battle over technological supremacy, that has been playing out. At the heart of it is who will dominate the next generation of technologies, such as 5G and artificial intelligence.

There is absolutely zero chance of large companies ... falling prey to Chinese interest as they all have significant U.S. business and customers and you'd expect U.S. to block any such deal. Neil Campling Mirabaud Securities