White House Orders Divestiture of Digital Chip Business Following CFIUS Investigation
On January 2, 2026, President Trump issued an Executive Order entitled “Regarding the Acquisition of Certain Assets of EMCORE Corporation by HieFo Corporation”1 directing HieFo Corporation, a photonic chip manufacturer, to divest the recent acquisition of certain assets of EMCORE Corporation, comprised of its digital chips and related wafer design, fabrication, and processing businesses, including a semiconductor manufacturing facility (the “Digital Chips Business”). Specifically, the administration found credible evidence that the acquisition, completed on April 20, 2024, posed a national security risk to the United States, given HieFo is ostensibly controlled by a citizen of the People’s Republic of China.
Background on the Transaction
On April 30, 2024, Hiefo, co-founded by Dr. Genzao Zhang and Harry Morre, completed the acquisition of substantially all assets related to EMCORE’s non-core, discontinued Digital Chips Business line and InP wafer fabrication operations, including the transfer of equipment and intellectual property from EMCORE’s facility in Alhambra, California (Transaction). Regarding the Transaction, Dr. Zhang stated, “By leveraging more than four decades of innovative legacy in optoelectronic devices from EMCORE, we will continue the pursuit of the most innovative and disruptive solutions to serve telecom, datacom, and AI connectivity industries.2”
Neither HieFo nor EMCORE sought approval from the Committee on Foreign Investment in the United States (CFIUS) prior to the closure of the Transaction, valued at approximately $3 million.
Investigation by CFIUS
Beginning in 2025, nearly two years following its closure, CFIUS initiated an investigation into the Transaction under its authority to review non-notified transactions pursuant to Section 721 of the Defense Production Act (DPA). Under the Foreign Investment Risk Review Modernization Act (FIRRMA) and subsequent regulations, CFIUS can initiate reviews on its own accord if it has reason to believe that a non-notified transaction poses national security risks. This authority enables CFIUS to scrutinize a broader range of foreign investments and acquisitions, even when parties do not submit formal notices, thereby enhancing its capacity to prevent transactions that could compromise U.S. national security. Moreover, the sources of information for CFIUS’s identification and review of non-notified transactions continue to expand, including through transactions identified by the U.S. Department of Agriculture.
Through the course of its investigation, CFIUS identified certain national security risks associated with the Transaction, including HieFo’s access to EMCORE’s intellectual property and expertise and the potential diversion of indium phosphide chips manufactured by the Digital Chips Business outside the United States — particularly to entities and individuals linked to China. These findings provided the basis for President Trump’s Executive Order mandating divestiture.
Divestiture of Digital Chips Business
Now, no later than 180 calendar days from the issuance of the Executive Order, unless extended by CFIUS, HieFo must divest all interests and rights in the Digital Chips Business, including contracts, inventory, tangible property, parts, and real and intellectual property. Moreover, in the interim, HieFo is prohibited from granting access to the Digital Chips Business or any non-public technical information, information technology systems, books and records, or any facilities to any persons who are not personnel of HieFo.
This use of an executive order to mandate divestment illustrates a shift toward more assertive enforcement of national security reviews, even in cases where transactions were not formally notified or reviewed beforehand. This signals to foreign investors that the U.S. government is prepared to take swift and decisive action to block or unwind deals deemed risky to U.S. national security.
Geopolitical and Strategic Context
The executive order must be viewed within the larger framework of escalating U.S.-China tensions over technology dominance and supply chain security. Semiconductors are a strategic asset, underpinning military, telecommunications, AI, and other critical technologies. The U.S. government is increasingly focused on preventing access to such cutting-edge chip technology by Chinese entities, especially amid concerns over espionage, technology transfer, and potential military applications. Amid these national security concerns, a new round of CFIUS reform appears likely. To that end, the House Committee on Financial Security is already scheduled to evaluate the operations of CFIUS in early 2026.
Given this context, companies engaging in foreign investments, especially in advanced technology sectors, should anticipate increased CFIUS scrutiny and consider voluntary notification to mitigate risks of enforcement actions. Entities should conduct thorough assessments of their current holdings and planned transactions involving sensitive or emerging technologies with particular attention paid to ownership structures, source countries, and the nature of assets involved.
Buchanan’s team of international trade and national security attorneys closely monitors developments relevant to foreign investment and is ready to assist clients in navigating these complex regimes. To learn more, Buchanan provides literature relevant to the Committee on Foreign Investment in the United States and Foreign Ownership, Control or Influence.