Chinese investors have been pouring money into American technology companies in recent years, and this has raised concerns that Chinese control may damage America's national security.
It can happen because Chinese companies gain knowledge to develop high-end technology for military applications.
In addition, the deal may pose a direct threat if they allow the Chinese government to infiltrate the supply chain for products purchased by the US government, thus creating opportunities for oversight or sabotage.
Lattice, a Portland-based company with about 1,000 employees, believes that the Trump administration should not worry. Lattice says they are shifting chipmaking to other companies, so there is no risk of manufacturing facilities being compromised.
Lattice also offers to transfer intellectual property rights to the US government to ensure that it does not fall into the hands of China.
However, the Trump government decided these measures were insufficient to protect national security.
In a statement issued after Trump's decision, the Treasury raised concerns about "the potential transfer of intellectual property to foreign acquirers, the role of the Chinese government in supporting this transaction, and the importance of the integrity of the semiconductor supply chain to the US government, and the use of Lattice products by the government US."
Trump's decision was not a surprise, especially given Trump's reputation as a Chinese hardliner. While the president has the highest authority to block transactions for national security reasons, the president regularly follows the recommendations of the CFIUS panel, chaired by the Minister of Finance.