China blocks SoftBank's $5.4 billion robotics deal

Japanese investment giant SoftBank Group has suffered a major setback. A Chinese government agency has refused to approve the $5.4 billion deal for SoftBank to acquire the robotics unit of the Swiss-Swedish group ABB. According to a Bloomberg report, ABB stated in an email statement that this acquisition has been blocked by China's 'Office of the Working Mechanism for Foreign Investment Security Review'. Following this decision, SoftBank's shares fell by approximately 7% on the Tokyo Stock Exchange on Thursday. A spokesperson for SoftBank has declined to comment on the matter.

This deal was very important for SoftBank founder Masayoshi Son. He wanted to strengthen his hold on the Artificial Intelligence (AI) sector through this transaction. This robotics unit of ABB has over 7,000 employees and provides robotic arms and industrial machinery to major manufacturing companies like BMW. The company also has a large presence in China. Investors were hopeful that ABB's contribution would increase SoftBank's revenue and profits, especially as the company awaits the public debut of OpenAI.

According to Bloomberg Intelligence analyst Kirk Boodry, ABB Robotics may not have the cutting-edge innovation of SoftBank's other startups, but the manufacturing expertise it possesses was necessary to turn robotic concepts into real businesses. China's decision has cast clouds of uncertainty over SoftBank's future plans. This move reflects the Chinese government's strict policy regarding data and technology security. China believes that data is the foundation of AI, and therefore, they are imposing restrictions on the transfer of critical information abroad. Data is also very important in the robotics sector.

Previously in April, China's National Development and Reform Commission also blocked the $2 billion acquisition of the 'Manus' startup by Meta Platforms. According to a Financial Times report, this SoftBank deal was also placed under foreign investment security review by China's state planner. Japan itself is home to some of the world's largest robot-making companies like Fanuc, Yaskawa Electric, and Kawasaki Heavy Industries. These companies are partnering with Nvidia to survive in the growing competition with China.

SoftBank Group is a Japanese holding company founded by Masayoshi Son. The company is known for its large investments in the technology, energy, and financial sectors. SoftBank has previously invested as much as $65 billion in OpenAI and had also announced spending billions of dollars on data center projects. Investors were concerned about whether the company was investing beyond its capacity, and the ABB deal could have been helpful in alleviating these concerns.