China is seeking to buy one of two US disk drive makers in a move sparking new concerns about transfers of sensitive technology, the New York Times reported Saturday.
Citing William Watkins, chief executive of Seagate, one of the two disk drive manufacturers in the United States, the Times said the overture by an unidentified Chinese firm to buy one of them is adding to tensions over China's ambitions to develop advanced industrial and military technologies.
"The overture ... has resurrected the issues of economic competitiveness and national security raised three years ago when Lenovo, a Chinese computer maker, bought IBM's personal computer business," the Times said.
The report did not identify which disk drive maker the Chinese firm sought to buy -- Western Digital is the other one -- and Watkins said that Seagate is not for sale, though he added that if an offered price was high enough shareholders could be enticed to sell.
The report also noted that disk drives are not included on a government list of export-controlled technologies.
Nevertheless, it said, because the newest generation of hard disk drives include built-in security and encryption software and hardware, "the attempted purchase of an American disk drive company would require a security review by the federal government, according to several government officials."
"The US government is freaking out," said Watkins, whose company recently began marketing drives with built-in encryption capabilities.
Washington took note of but ultimately did not interfere with the partly government-owned Lenovo's takeover of IBM's personal computer unit in 2005.
But that same year resistance among the US government, Congress and public forced the China National Offshore Oil Corporation to give up in its attempt to take over US oil company Unocal, which was eventually merged into Chevron.
"Seagate would be extremely sensitive," an unidentified technology industry executive told the Times. "I do not think anyone in the US wants the Chinese to have access to the controller chips for a disk drive."
Michael Wessell, who sits on the US-China Economic and Security Review Commission, which reviews the national security implications of US-China trade for Congress, told the Times that "the purchase by the Chinese or other nations (of a disk drive maker) merits a full review to determine what our risks are."
But Kenneth Lieberthal, a China expert on the National Security Council in the 1990s, told the paper he doubted that China would be willing to face more controversy over a takeover, even as Beijing is pushing to make use of tens of billions of US US dollars in foreign reserves to acquire strategic and commercial assets around the world.
"The Chinese have been very concerned about how to invest in the United States without producing the kind of political firestorm they ran into when they tried to buy Unocal," said Lieberthal.
"The government really does not want to confront the kind of situation it ran into with Unocal."
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