Czech Intelligence Warns of Chinese Acquisitions in Semiconductor Testing and Precision Optics Firms

BIS Findings: Acquisition Patterns and Target Selection

The BIS annual report, released in unredacted summary form on 17 October 2026, describes a systematic acquisition pattern in which entities with traceable links to Chinese state industrial policy have taken minority stakes — typically 15-30 percent — in Czech SMEs operating in semiconductor testing, precision lens grinding, and electro-optical sensor calibration. The report identifies six firms by sector and approximate scale without naming them publicly, noting that law enforcement proceedings remain ongoing in at least two cases. The acquisitions were structured through holding companies registered in Luxembourg and the Netherlands, exploiting EU freedom of establishment to obscure the ultimate beneficial ownership from Czech registry disclosure requirements. In several cases, the initial acquisition was accompanied by technology transfer agreements that gave the Chinese-linked investors access to proprietary calibration software and optical design specifications.

BIS characterises the target selection as systematic rather than opportunistic. Czech semiconductor testing capabilities — concentrated in the South Moravian and Zlín regions — include firms whose equipment is used in testing processes for automotive-grade chips and aerospace sensors, both sectors under active EU export control review. Precision optics firms in Liberec and Turnov supply components for European space programmes and defence optronics. The common thread is dual-use technology: commercially viable products whose underlying specifications and manufacturing knowledge have military and strategic intelligence applications that exceed their commercial value. BIS assesses that the acquisitions serve Chinese industrial intelligence objectives more than straightforward commercial return, given the modest revenues of the target firms.

Legislative Response and FDI Screening Reform

The Czech Ministry of Industry and Trade, in coordination with the Ministry of the Interior and BIS, has drafted amendments to the Act on Investment Screening that will substantially lower the notification threshold for technology-sector transactions and create a new 'critical technology' category with mandatory prior approval requirements. The EUR 1 million notification threshold for companies operating in dual-use, defence-adjacent, and critical infrastructure-adjacent technology replaces the current EUR 10 million floor, which was calibrated for large FDI transactions and misses most SME-scale precision manufacturing deals. The draft also expands the definition of a 'foreign investor of concern' to include entities with demonstrable links to foreign state industrial programmes, regardless of formal ownership nationality — directly targeting the Luxembourg/Netherlands layering technique identified in BIS findings.

The proposed framework aligns Czechia more closely with the FDI screening regimes of Germany, France, and the United States, all of which have moved toward risk-based, lower-threshold screening for technology sectors since 2020. Czech officials have noted that EU-level FDI coordination remains insufficient: member states share threat information through the EU FDI Screening Cooperation Network but are not required to notify each other of approved transactions or to block deals that another member state would reject. The Commission has proposed a more integrated EU-wide screening mechanism in its European Economic Security package, but legislative progress has been slowed by member state concerns about national sovereignty over investment policy.

Broader European Context

Czech BIS findings are consistent with reports from counterpart services in Germany and France that have identified analogous patterns in their precision manufacturing and advanced materials sectors. Germany's Federal Office for the Protection of the Constitution (BfV) flagged Chinese acquisition activity in Bavarian and Baden-Württemberg precision optics firms in its 2025 annual report, and France's SGDSN identified similar patterns in Île-de-France SMEs supplying to Thales and Safran. The geographic and sectoral convergence suggests a coordinated Chinese industrial intelligence effort targeting European dual-use technology at a tier below what existing large-deal screening frameworks were designed to catch.

The policy response at the European level is evolving. The EU's Export Control Regime for dual-use items, updated in 2021, covers technology transfers in controlled categories, but acquisition of firms rather than direct technology export falls outside export control authority. The FSR provides a tool for addressing subsidised foreign acquisitions but requires evidence of state subsidy rather than strategic intent. The most practical near-term tool remains strengthened national screening, complemented by improved information sharing through the EU FDI network. Czech, German, and French officials are coordinating a joint proposal for the European Economic Security Council — established in 2025 — to mandate cross-notification of technology-sector FDI reviews by the end of 2026.

Sources

• BIS – Security Information Service Annual Report 2026
• Czech Ministry of Industry and Trade – FDI screening reform legislative proposal
• European Commission – European Economic Security Strategy: FDI screening review
• Hospodářské noviny – BIS varuje před čínským zájmem o české technologické firmy