What happened

Shares of Cypress Semiconductor Corporation (CY) plunged today, down by 14% as of 11:30 a.m. EST, on a report that the government may seek to block Infineon's (IFNNY 0.44%) acquisition of the company. Last summer, Infineon announced a deal to buy the smaller chipmaker for $23.85 per share in cash.

So what

National security officials are calling for President Trump to block the proposed transaction, according to Bloomberg. The concern is that the acquisition presents national security risks due to Infineon's business interests in China, which represents approximately a third of revenue. Infineon estimates that the Cypress acquisition can yield 180 million euros ($204 million) in annual cost synergies by 2022 and 1.5 billion euros ($1.7 billion) in revenue synergies longer term.

An Infineon chip

Image source: Infineon.

Infineon is based in Germany, but the Trump Administration has been broadly targeting China over allegations of intellectual property theft throughout Trump's trade war with the country. The fear is that China could somehow obtain American technology through business with Infineon.

Now what

Infineon had initially hoped to close the deal by the end of 2019 or early 2020 but has acknowledged that it has taken longer than expected.

"We have made further progress in obtaining antitrust clearances," CEO Reinhard Ploss said on the earnings call last month. "About three weeks ago, the Taiwanese authorities greenlighted the deal." Ploss added that Infineon is engaged in "a constructive dialogue" with the U.S. Committee on Foreign Investment in the United States (CFIUS), among other regulatory bodies, and at the time expected to close the transaction around the end of the first quarter or beginning of the second quarter.