San Diego Firm Willing to Buy Fairchild Units

January 12, 1987|BILL RITTER | San Diego County Business Editor

SAN DIEGO — A San Diego high-tech firm said Sunday it is willing to buy the defense-related operations of Fairchild Semiconductor if the federal government decides the pending sale of those businesses to a Japanese firm endangers national security.

Applied Micro Circuits would be an "alternative" buyer of the Fairchild units now proposed to be sold to the microelectronics subsidiary of Japan-based Fujitsu Ltd., according to Roger Smullen, Applied Micro Circuits chairman and chief executive.

The proposed sale of Fairchild--the nation's second-oldest computer chip manufacturer behind Texas Instruments--to Fujitsu is under review by federal officials, who are trying to determine if the transaction would compromise national security.

The Washington Post on Saturday, quoting business and Capitol Hill sources, reported that Applied Micro Circuits had made an offer to buy the Fairchild segments. Smullen, however, maintained in a telephone interview Sunday that "we haven't made a formal offer. . . . it's in the very early stages."

Makes High-Speed Circuits

Applied Micro Circuits is a privately held manufacturer of high-speed integrated circuits. Annual sales total about $25 million and the work force numbers about 235, all in San Diego, said Smullen.

He said his firm would be interested in Fairchild because "we're in like businesses." About half of Applied Micro Circuits operations are defense-related, he said.

Fairchild Semiconductor is a subsidiary of Schlumberger Ltd., a French oil services company that bought the Cupertino-based chip maker in 1979. Schlumberger is amid a corporate shake-up because of the depression in the oil service industry.

The proposed sale of Fairchild, first announced in late October, sparked a review by the Reagan Administration. As proposed, Fairchild would be spun off as a new company. Fujitsu would have an 80% ownership in the company, and Schlumberger would retain 20%.

U.S. officials are concerned that the sale of sensitive defense manufacturing operations to a foreign company could compromise national security interests, and the Post reported that lawmakers are putting increased pressure on federal officials to block the sale.

'Serious Implications'

Fujitsu's acquisition of Fairchild "could have very serious implications for our national defense," according to Sen. J. James Exon, (D-Neb.) a key member of the Senate Armed Services Committee.

In a letter to President Reagan, Exon maintained that French ownership of Fairchild "poses much less of a problem" to U.S. security than Japanese ownership because of Japan's greater share of the high-technology market.

Schlumberger officials would rather not break up the Fairchild operations, according to William Janeway of Eberstadt Fleming, the U.S. arm of a British investment banking firm. Eberstadt Fleming is an investor in Applied Micro Circuits, according to Smullen.

Schlumberger would divide up the Fairchild operations only if the Reagan Administration forced it to, Janeway told the Post. It is considered uncertain, however, if Fujitsu would still want to purchase Fairchild without its defense-related segments. Fujitsu is interested in Fairchild to shore up its American distribution network, which is considered weak.

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