(17 January 2025)

We are now entering a completely different dimension of investment screening.

It is not concerning any inbound investment by third country investors into the EU, but all the outbound investments by EU companies into third countries, especially in geopolitical sensitive countries, such as China.

 The EU Commission has just announced, on January 15, 2025, its recommendation on calling Member States to review outbound investments and assess risks to economic security[1] in three sectors: semiconductors, artificial intelligence and quantum technologies.

1.     Scope of review

I. An EU investor

This refers to any natural or legal person resident or established in the Union.

II. “Outbound Investments” of an EU investor

The scope includes in summary, all kinds of outbound investments:

  • Merger
  • Acquisition
  • Asset transfer
  • Greenfield investment
  • Joint venture
  • Even venture capital, with possible technology or personal transfer
  • It also covers indirect investments made by an EU investor, such as investments made through a third country entity which is used as an investment vehicle, through an existing subsidiary or in the context of an existing joint venture. For instance, through a HK or Singapore intermediate company to invest into a Chinese company or a project in China

III. Limited to Outbound Investments into three sectors

Only Outbound Investments related to the following three sectors are covered in the review:

  • Semiconductor technologies, meaning any technology or know-how related to:
  • design of integrated circuits and other semiconductors[2], including related semiconductor intellectual property core;
  • electronic design automation software for the design of integrated circuits and other semiconductors, or for the design of advanced packaging;
  • front-end fabrication of integrated circuits and other semiconductors;
  • assembly, testing and packaging of integrated circuits and other semiconductors, including advanced printed circuit boards and packaging;
  • semiconductor manufacturing equipment, both for the front-end and back-end fabrication of integrated circuits and other semiconductors, including etching, deposition, epitaxy, lithography, advanced packaging, testing or metrology tools;
  • core components or software of semiconductor manufacturing equipment;
  • materials used in the fabrication of integrated circuits and other semiconductors, in particular specialty chemicals, rare gases, semiconductor materials, substrates or wafers.

 

  • Artificial intelligence (‘AI’) technologies, meaning any technology or know-how related to a machine-based system that is designed to operate with varying levels of autonomy and that may exhibit adaptiveness after deployment, and that, for explicit or implicit objectives, infers, from the input it receives, how to generate outputs such as predictions, content, recommendations, or decisions that can influence physical or virtual environments (‘AI system’), used for the following applications:
  • generative AI systems trained using more than 10^25 FLOPS (floating point operations);
  • generative AI systems trained in a significant part on biological/ genomic data, or designed to be used in a biotechnological, space or defence context.

 

  • Quantum technologies, meaning any technology or know-how related to:
  • quantum computing;
  • quantum communications;
  • quantum sensing.

IV. Limited in time

All new and ongoing transactions as well as transactions completed since 1 January 2021 should be covered in the review. In exceptional cases, Member States can also identify transactions which cover activities prior to that date.

2.     What will follow as from now

Member States should establish review system including voluntary or mandatory provision of information on transactions.

Such information should include, amongst others, information in respect of the parties, the value of investment, the shares and voting rights, the products, services and technologies, any contractual arrangements for R&D, IP licenses and key personnel movement, the dates of investment, information on previous and announced transactions by the parties, information on public funding provided by the EU or a Member State.

In essence, all information that can help assessing the potential risks of technology leakage from the EU to a third country.

The Member states shall also carry out risk assessments on each transaction.

An updated report on implementation progress shall be submitted by the Member States to the Commission by 15 July 2025.

By 30 June 2026, Member States shall submit a comprehensive report.

We will closely monitor the implementation of such Recommendation in Belgium and its neighbouring countries, and how such information could be collected by the authority within the current legal regime or following a new legislative investment screening regime.

This obviously impacts many European companies in these three sectors which have or are planning to set up subsidiaries, create JV, transfer technology/research personnel/IP to a third country, such as China.

At least in the semiconductor sector, we note from our experiences, that many companies active in Europe and China will be directly concerned by the application of this Recommendation.

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For more information on FDI, national security review and investment review in Belgium and EU, please contact DALDEWOLF CHINA & ASEAN DESK (Xiufang Tu, [email protected]).

 

[1] See press release: Recommendation on outbound investments, and Commission Recommendation(EU) 2025/63 of 15 January 2025 on reviewing outbound investments in technology areas critical for the economic security of the Union: EUR-Lex – 32025H0063 – EN – EUR-Lex .

[2] The concept of ‘integrated circuits and other semiconductors’ includes but it is not limited to microprocessors, graphic processors, microcontrollers, logic chips, memory chips, radio frequency chips, photonic chips, analog chips, quantum chips, optical semiconductors, power semiconductors, discretes and sensors / microsystems.