FRANKFURT (Reuters) - China’s Fujian Grand Chip Investment Fund has dropped its takeover bid for chip equipment maker Aixtron after the United States blocked the deal on security grounds, throwing the German company’s future into doubt.

The logo of Aixtron SE is pictured on the roof of the German chip equipment maker's headquarters in Herzogenrath near the western German city of Aachen, October 25, 2016. REUTERS/Wolfgang Rattay

The collapse of the Aixtron deal comes amid growing objections in Germany and the United States to China buying up firms with strategic technologies abroad without allowing reciprocal transactions at home.

Fujian’s takeover vehicle Grand Chip Investment said on Thursday its offer had lapsed as it had failed to obtain the necessary U.S. regulatory approvals.

The 670 million euro ($723 million) takeover offer announced in May was already in doubt after the German government withdrew its approval in October, reportedly at the bidding of the United States.

U.S. President Barack Obama then stopped Fujian from buying Aixtron U.S. following an assessment by the Committee on Foreign Investment in the United States (CFIUS), an inter-agency task force under the Treasury Department.

China’s Foreign Ministry fired back at what it called “groundless accusations” against Chinese firms by the United States and lamented the “politicization” of what it said was a commercial takeover.

The German Economy Ministry said it was dropping a review of the deal now the bidder had withdrawn.

WEAPONS SYSTEMS

The crux of the issue for Aixtron is that it makes devices which produce crystalline layers based on gallium nitride that are used as semiconductors in weapons systems.

Its technology is being used to upgrade U.S. and foreign-owned Patriot missile defense systems and the U.S. Treasury said the deal had been blocked due to national security risks.

The U.S. opposition has been seen as a sign of concern in the West about the acquisition of new technology by Chinese players and comes after Washington blocked the sale by Philips of its U.S. lighting business to Asian buyers.

“Under (U.S. President-elect) Donald Trump, CFIUS will likely be used more extensively than it has been under previous presidents, which could have an impact on outbound M&A deals from China,” said Hans-Joerg Ziegenhain, partner for mergers and acquisitions (M&A) at law firm Hengeler Mueller.

Aixtron may face a bleak future as a stand-alone company, having said it would need to cut costs and jobs if the deal failed so it could compete in an overcrowded market where Chinese companies call the shots.

Aixtron Chief Executive Martin Goetzeler said it was now up to the government to support Germany’s technology industry and employees, for example by setting up an investment program.

“Aixtron should be a central element,” Goetzeler told Handelsblatt newspaper, adding that he saw great appeal in securing technology in the interest of Germany and its allies.

Investors who had already accepted Grand Chip’s takeover offer will have their shares returned on Dec. 13, the Chinese suitor said.

Shares in Aixtron closed down 3 percent at 3.78 euros on Thursday, well below the 6 euros per share Grand Chip Investment offered in May.