A United States security panel has withheld approval for Infineon's recent deal to acquire Wolfspeed, marking the latest acquisition to be blocked in recent years involving gallium nitride.

Infineon had planned to close the $850 million deal for the Cree business early this year. The company would gain a new products based on gallium nitride, more commonly known as GaN, and other materials that could replace silicon in radar to wireless infrastructure.

But Infineon recently said that U.S. officials had expressed concerns that the deal would threaten national security. The company said that the review had thrown the deal into uncertainty and that “there is considerable risk that the transaction, as agreed, is not going to close.”

In a separate statement, Cree said that both companies “are exploring whether there are alternatives to modify the transaction to mitigate or address the regulatory concerns.” The company added: "As a result, pending the outcome of these efforts, the likelihood or timing of closing the transaction is uncertain.

The concerns were passed down from the Committee on Foreign Investment in the United States, or Cfius, which has the power to review foreign acquisitions of chip suppliers. Staffed by Treasury and Justice Department representatives, the panel has turned its eyes toward the chip industry as companies buy each other faster than ever.

But it has particularly hardened its stance on China, which has been accused of stealing American chip technology and manipulating the market with billions of dollars in government funds. That has coincided with a growing suspicion in Washington of China’s attempt to close the gap with American chip technology.

But the negative response to Infineon’s deal could show that concerns have spread to traditional allies. Infineon is based in Neubiberg, Germany, and it isn’t known for selling the brains inside military radar and satellites. It stressed that the Wolfspeed deal would benefit its business of energy-energy efficient chips for electric cars and factory equipment.

Cfius does not making its rulings public, so not much is known about its concerns. But one possibility is that regulators are worried about losing Wolfspeed’s gallium nitride expertise. The company has valuable insight into layering the material on wafers of silicon carbide, an advanced semiconductor used by itself in power electronics.

These chips tolerate higher voltages and hotter temperatures than a simpler form of gallium nitride layered on normal silicon, according to Eric Higham, the director of advanced semiconductor applications at market research firm Strategy Analytics. That makes it vital to new generations of antiballistic missile radar and radio jammers.

Lockheed Martin is testing the reliability of Wolfspeed's gallium nitride power amplifiers for its Space Fence program, which will use radar to follow artificial satellites and space debris in orbit. Raytheon is designing its own gallium nitride chips to upgrade its Air and Missile Defense Radar for the U.S. Air Force.

Though he was unsure exactly why officials opposed the Wolfspeed deal, Higham said that the government stands to lose a critical supplier of semiconductors still outside the mainstream. “There is not a big population of GaN suppliers,” he said. “And losing Wolfspeed would be a big chunk of that.”

In the Wolfspeed deal, Infineon agreed to buy almost 2000 patents and the related chip factories, which have a special arrangement with the Department of Defense to fill classified chip orders. The plants contain specialized tools for making power electronics based on silicon carbide and radio chips based on gallium nitride.

Wolfspeed is considered a trusted foundry by the Defense Microelectronics Activity, an Defense Department unit that presides over chip upgrades and replacements in weapons systems. The agency began handing out trusted foundry rating in 2004 to identify secure domestic chipmakers and cut down on counterfeit parts. The program now includes 77 suppliers, some of which are foreign-owned.

Infineon is not known for filling government contracts, but there are exceptions. It sells the security chips embedded in U.S. passports. And when it acquired International Rectifier in 2014, it inherited business selling satellite electronics hardened against radiation to the National Aeronautics and Space Administration.

The company thought about signing a special security agreement with the U.S. government that would allow it continue selling them gallium nitride after the Wolfspeed acquisition, according to Asif Anwar, a defense analyst at Strategy Analytics. But the company may have had trouble convincing a more protective Cfius.

The deal had been scheduled to close late last year but the Cfius review process pushed back that timeline. At the same time, however, Cree’s chief financial officer Michael McDevitt expressed little concern in November that it would hit the same roadblocks as other deals involving gallium nitride.

In 2015, U.S. officials blocked a $2.9 billion deal that would have given Chinese investors a controlling stake in a Philips unit that makes light-emitting diodes based on gallium nitride. And last year, President Obama blocked the pending sale of German chip equipment maker Aixtron to China’s Fujian Grand Chip on the recommendation of Cfius. Aixtron designs tools that are essential to depositing gallium nitride onto wafers.

It is not clear that suspicions about China weighed on the Wolfspeed deal. But in 2015, Infineon traced around $1.5 billion, or almost a fourth of its total revenue, to China, which last year made record investments into European businesses. Infineon is now building its second Chinese factory in Wuxi for discrete components and security card chips.

Cfius can suggest ways to make the deal more palatable, but it did not in this case. The panel “has not identified any mitigation measures that it believes would adequately mitigate the particular national security risks posed by the transaction,” Infineon said. And that could mean that the White House doesn't want to lose Wolfspeed at all.