RESPONSE TO SECOND REQUEST FOR INFORMATION
CFIUS CASE NO. CFIUS-023-07-3841
Investigation Phase Supplemental Submission
October 6, 2023
SUBMITTED BY
CALDERWOOD & HARKNESS LLP 1750 K Street NW, Suite 800 Washington, DC 20006 Telephone: (202) 555-7100 Facsimile: (202) 555-7199
On behalf of Halcyon Semiconductor Aktiengesellschaft and Halcyon US Holdings Inc.
Counsel of Record:
Margaret "Peggy" Ashworth, Of Counsel, National Security & CFIUS Practice Beatrice Holloway, Partner, Mergers & Acquisitions Practice
Additional Contributing Counsel:
Lt. Col. (Ret.) David Caruso, Senior Counsel, Government Contracts & Export Controls Priya Venkataraman, Associate, International Trade & Sanctions Omar Siddiqui, Lead Associate, intellectual Property Christy Bauer, Working Associate, intellectual Property Kenneth Morales, Associate, Corporate / M&A
Addressed to:
Staff Chairperson Committee on Foreign Investment in the United States U.S. Department of the Treasury Office of Investment Security 1500 Pennsylvania Avenue NW Washington, DC 20220
Reference:
CFIUS Case No. CFIUS-023-07-3841 Second Request for Information, dated September 22, 2023
Parties to the Transaction:
Halcyon Semiconductor Aktiengesellschaft ("HSAG") Halcyon US Holdings Inc. ("Halcyon US Holdings") Marlowe Asset Management Photonics Inc. ("VPI")
Joint Submission Note:
This submission has been prepared in coordination with Wethersfield & Gale LLP (Harrison Whitfield, Partner), counsel to VPI and the Sellers. VPI-sourced information contained herein has been reviewed and approved by VPI and its counsel prior to submission.
CONFIDENTIAL — CFIUS FILING — NOT FOR PUBLIC DISCLOSURE This document contains confidential business information and trade secrets of the parties and is submitted pursuant to the confidentiality provisions of Section 721 of the Defense Production Act of 1950, as amended, 50 U.S.C. § 4565, and 31 C.F.R. Part 800. Unauthorized disclosure is prohibited by law.
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I. INTRODUCTION AND PROCEDURAL BACKGROUND
Dear Staff Chairperson:
On behalf of Halcyon Semiconductor Aktiengesellschaft ("HSAG") and Halcyon US Holdings Inc. ("Halcyon US Holdings"), Calderwood & Harkness LLP respectfully submits this Response to the Second Request for Information ("Second RFI") issued by the Committee on Foreign Investment in the United States ("CFIUS" or the "Committee") in connection with CFIUS Case No. CFIUS-023-07-3841 (the "Transaction").
As the Committee is aware, HSAG and Marlowe Asset Management Photonics Inc. ("VPI") filed a joint voluntary notice ("JVN") with CFIUS on July 14, 2023, pursuant to 31 C.F.R. § 800.501, regarding HSAG's proposed acquisition of 100% of the outstanding shares of VPI through its newly formed wholly owned U.S. subsidiary, Halcyon US Holdings. The Committee accepted the JVN on July 21, 2023, thereby commencing the initial 45-day review period under Section 721(b)(1)(E) of the Defense Production Act of 1950, as amended, 50 U.S.C. § 4565(b)(1)(E).
On August 4, 2023, the Committee issued a First Request for Information ("First RFI") containing fourteen questions concerning the Transaction structure, the parties' business operations, and preliminary national security considerations. The parties submitted comprehensive responses to the First RFI on August 18, 2023. Those responses are incorporated herein by reference to the extent relevant.
The initial 45-day review period concluded on September 4, 2023. On that same date, the Committee determined that the Transaction warranted further investigation and commenced a 45-day investigation pursuant to Section 721(b)(2) of the Defense Production Act. The parties were notified that the co-lead investigating agencies for this matter are the Department of Defense ("DoD") and the Department of Energy ("DOE"), reflecting the Committee's assessment that VPI's technology and government contract activities implicate equities within the jurisdictions of both agencies.
On September 22, 2023, the Committee issued its Second Request for Information (the "Second RFI"), containing twenty-two (22) questions organized into four subject-matter areas:
• Section A — VPI intellectual Property Transfer Risks (Questions 1–7);
• Section B — Supply Chain Dependencies (Questions 8–13);
• Section C — HSAG Relationships with Non-Allied Foreign Governments (Questions 14–19); and
• Section D — Personnel Continuity Plans for Cleared VPI Employees (Questions 20–22).
This submission provides comprehensive responses to all twenty-two questions posed in the Second RFI. The responses incorporate information provided by both HSAG and VPI. All VPI-sourced information has been prepared in coordination with Wethersfield & Gale LLP (Harrison Whitfield, Partner), counsel to VPI and the Sellers, and has been reviewed and approved by VPI's management and counsel prior to inclusion in this submission.
Concurrently with this submission, VPI is filing under separate cover a Supplemental Exhibit consisting of a detailed VPI Supply Chain Map in spreadsheet format, providing a comprehensive depiction of VPI's supply chain for critical materials and components. This Supplemental Exhibit is referenced and summarized in the responses to Questions 8 through 13 below.
HSAG and VPI certify that the responses contained herein are complete and accurate to the best of their knowledge, information, and belief after diligent inquiry and reasonable investigation. The parties reserve the right to supplement these responses if additional information becomes available that is material to the matters addressed herein. The certifications set forth in Section VIII of this submission are provided pursuant to 31 C.F.R. § 800.502.
II. DEFINITIONS AND ABBREVIATIONS
For ease of reference, the following definitions and abbreviations are used throughout this submission. Unless otherwise defined herein, capitalized terms shall have the meanings ascribed to them in the Joint Voluntary Notice filed on July 14, 2023, which definitions are incorporated herein by reference.
III. SECTION A — VPI INTELLECTUAL PROPERTY TRANSFER RISKS (Questions 1–7)
The following responses address Questions 1 through 7 of the Second RFI, which concern the identification and protection of VPI's intellectual property, the proposed Technology Control Plan for IP segregation, government-funded IP considerations, and the measures designed to prevent unauthorized technology transfer to HSAG or non-U.S. persons.
Question 1
Identify all VPI intellectual property — including patents, patent applications, trade secrets, and proprietary know-how — that could be accessed by non-U.S. persons following the closing of the Transaction, and describe the export control classification of such intellectual property.
Response to Question 1
A. Overview of VPI's intellectual Property Portfolio
VPI maintains a substantial portfolio of intellectual property reflecting over two decades of research, development, and manufacturing innovation in the field of GaN-on-SiC semiconductor technology. VPI's IP portfolio encompasses granted patents, pending patent applications, registered trade secrets, and proprietary know-how accumulated through years of experience in epitaxial growth processes, transistor fabrication, and device-level reliability engineering.
As of the date of this submission, VPI holds forty-seven (47) granted United States patents and twelve (12) pending United States patent applications. VPI does not hold any foreign patents or foreign patent applications, consistent with the defense-focused nature of its technology and the export control restrictions applicable to its core innovations.
B. Key Patent Families
VPI's patent portfolio is organized around three principal patent families, each of which covers a distinct area of VPI's core technology:
(i) GaN-on-SiC Epitaxial Growth Process. This patent family comprises eight (8) granted U.S. patents, bearing U.S. Patent Nos. 9,XXX,001 through 9,XXX,008, with the earliest priority date in 2012. These patents cover VPI's proprietary methods for growing high-quality GaN epitaxial layers on SiC substrates, including buffer layer architectures, nucleation techniques, and in-situ monitoring processes that enable VPI to achieve industry-leading crystal quality and uniformity. The innovations claimed in this patent family underpin VPI's ability to produce GaN wafers with defect densities significantly below commercially available alternatives, which is a critical factor in achieving the high reliability and performance required for defense applications.
(ii) HEMT Gate Structure Optimization. This patent family comprises nineteen (19) granted U.S. patents, bearing U.S. Patent Nos. 10,XXX,101 through 10,XXX,119, with the earliest priority date in 2015. These patents relate to VPI's advanced gate structure designs for GaN HEMT devices, including gate recess profiles, field plate configurations, and passivation techniques that optimize power density, gain, and breakdown voltage. Several of the patents in this family were developed under U.S. government-funded contracts and are subject to government rights as discussed in the response to Question 3 below.
(iii) mmWave Broadband Matching Network. This patent family comprises twenty (20) granted U.S. patents, bearing U.S. Patent Nos. 11,XXX,201 through 11,XXX,220, with the earliest priority date in 2018. These patents cover VPI's proprietary techniques for designing and fabricating on-chip and off-chip impedance matching networks for broadband operation at millimeter-wave frequencies. This technology enables VPI's GaN power amplifier products to achieve broad instantaneous bandwidth performance at frequencies relevant to next-generation radar, electronic warfare, and 5G communications systems.
C. Trade Secrets and Proprietary Know-How
In addition to its patent portfolio, VPI maintains thirty-one (31) registered internal trade secrets. These trade secrets are formally catalogued, assessed, and managed under VPI's Trade Secret Management Program, which assigns each registered trade secret a unique identifier, classification level, and access control designation. The registered trade secrets fall primarily into two categories:
(i) Proprietary GaN Epitaxial Recipes. These trade secrets encompass the specific process parameters — including growth temperatures, gas flow rates, precursor compositions, timing sequences, and chamber conditioning protocols — that VPI uses to produce GaN epitaxial layers with the crystal quality and uniformity required for high-reliability defense applications. These recipes represent the accumulated know-how of VPI's epitaxial growth team over more than fifteen years of development and process optimization and are not derivable from VPI's published patents or patent applications.
(ii) Die-Level Reliability Screening Processes. These trade secrets cover VPI's proprietary methods for screening individual GaN HEMT dies for reliability and performance prior to packaging and delivery. VPI's reliability screening processes, which incorporate accelerated life testing protocols, parametric drift analysis algorithms, and burn-in optimization techniques, enable VPI to deliver products meeting the stringent reliability requirements of military specifications (e.g., MIL-PRF-38534, MIL-STD-883). These screening processes are a significant source of VPI's competitive differentiation and are closely guarded.
D. Distinction Between Published Patent Claims and Controlled Technical Data
It is important for the Committee's analysis to distinguish between the published claims of VPI's granted patents and pending patent applications, on the one hand, and the underlying controlled technical data associated with VPI's manufacturing processes, design files, test data, and process parameters, on the other. Published patent claims are, by their nature, publicly available through the U.S. Patent and Trademark Office and do not constitute controlled technical data under either the ITAR or the EAR. The publication of a patent claim does not disclose the proprietary process know-how, manufacturing parameters, or engineering data required to actually practice the claimed invention at the level of performance and reliability that VPI achieves.
The sensitive information that requires protection in the context of the Transaction is the controlled technical data — the design files, process runsheets, test protocols, reliability data, simulation models, and engineering notebooks — that enables VPI to practice its patented inventions and to manufacture GaN-on-SiC devices meeting defense specifications. This controlled technical data falls into the following export control categories:
• ITAR Category XI(a)(3): Technical data directly related to the design, development, production, or manufacture of defense articles classified under U.S. Munitions List Category XI (Military Electronics), including GaN HEMT power amplifier designs for defense applications such as radar T/R modules and electronic warfare systems.
• EAR ECCN 3A001: Heterostructure semiconductor devices, including GaN HEMT devices meeting certain performance thresholds for power density and operating frequency.
• EAR ECCN 3A991: Semiconductor devices not controlled under ECCN 3A001 but meeting lower performance thresholds, applicable to certain of VPI's commercial-grade devices.
• EAR ECCN 3E001: Technology for the development or production of items controlled under ECCN 3A001, encompassing the technical data and know-how associated with VPI's GaN manufacturing processes.
E. Post-Closing Access Protections
Post-closing, HSAG proposes that no controlled technical data — whether classified under the ITAR or the EAR as described above — will be accessible to non-U.S. persons, including HSAG parent company personnel, non-U.S. HSAG employees, or any other foreign nationals, without prior authorization from the relevant U.S. government agency. Specifically, ITAR-controlled technical data would require a license or other authorization from the Directorate of Defense Trade Controls (DDTC), and EAR-controlled technical data would require a license or license exception from the Bureau of Industry and Security (BIS), in each case prior to any disclosure or transfer to a non-U.S. person. These restrictions will be enforced through the Technology Control Plan described in response to Question 2 below. Published patent claims, which are publicly available and not controlled, are not subject to these restrictions.
Question 2
Provide a detailed description of the proposed Technology Control Plan (TCP) for segregating and protecting VPI's controlled intellectual property from unauthorized access by HSAG and other non-U.S. persons post-closing.
Response to Question 2
HSAG and VPI propose to implement a comprehensive Technology Control Plan ("TCP") that will govern all aspects of the handling, storage, access, and transmission of VPI's controlled technical data and intellectual property following the closing of the Transaction. The TCP is designed to ensure that no controlled technical data — whether subject to the ITAR, the EAR, or classified national security information restrictions — is disclosed, transferred, or otherwise made accessible to any non-U.S. person, including HSAG parent company personnel, without prior authorization from the relevant U.S. government authority. The principal elements of the proposed TCP are as follows:
A. Prohibition on Unauthorized Transfer of Controlled Technical Data
The TCP will establish an absolute prohibition on the transfer of VPI technical data controlled under the ITAR or the EAR to any non-U.S. person — including HSAG's Vorstand (Management Board) and Aufsichtsrat (Supervisory Board) members, non-U.S. HSAG employees, HSAG's other non-U.S. subsidiaries, and any third parties who are non-U.S. persons — without prior written authorization from the Directorate of Defense Trade Controls (in the case of ITAR-controlled data) or the Bureau of Industry and Security (in the case of EAR-controlled data), as applicable. This prohibition extends to all forms of transfer, including oral disclosures, visual access, electronic transmission, physical delivery, and any other means of communication.
B. Physical Access Controls
All classified and ITAR-controlled technical data, as well as trade secrets and proprietary know-how relating to VPI's GaN defense technology, will be stored exclusively at VPI's two U.S. facilities:
(i) VPI Headquarters: 7400 Ridgeline Parkway, Colorado Springs, CO 80919. This facility houses VPI's corporate offices, design engineering teams, program management functions, and certain unclassified ITAR-controlled technical data.
(ii) VPI Albuquerque Fabrication Facility: 9200 Innovation Boulevard, Albuquerque, NM 87113. This facility houses VPI's 45,000-square-foot GaN-on-SiC fabrication cleanroom, epitaxial growth equipment, device processing lines, test and characterization laboratories, and all classified and ITAR-controlled manufacturing-related technical data. The Albuquerque fab holds VPI's Facility Security Clearance at the SECRET level (CAGE Code 7VK92) and is the location where all classified program work is performed.
Physical access to areas of these facilities where controlled technical data is stored or where classified work is performed will be restricted to authorized U.S.-person VPI employees who possess the requisite security clearance (for classified information) or need-to-know authorization (for ITAR- or EAR-controlled data). HSAG personnel, including HSAG designees on the VPI board of directors, will not be granted unescorted access to controlled areas of VPI facilities without prior approval from both the Government Security Committee and, where classified information is concerned, the Defense Counterintelligence and Security Agency.
C. Electronic Access Controls
VPI's information technology systems will be physically and logically separated from HSAG's global corporate network. The following specific measures will be implemented:
• VPI will maintain its own standalone IT infrastructure, including servers, network equipment, workstations, and communication systems, that is not connected to, or accessible from, HSAG's global network.
• VPI data — including all controlled technical data, design files, process documentation, test results, and trade secret materials — will be stored on U.S.-based servers located at VPI's facilities or at U.S.-based data center facilities operated by U.S.-person service providers.
• No shared cloud infrastructure will be used between VPI and HSAG. VPI will not store any controlled technical data on any cloud platform accessible to HSAG personnel or hosted outside the United States.
• Access to VPI's IT systems will be restricted to authorized U.S.-person VPI employees through multi-factor authentication, role-based access controls, and network access control lists.
• VPI will implement data loss prevention (DLP) solutions to monitor and prevent the unauthorized transmission of controlled technical data via email, file transfer, removable media, or other electronic means.
• VPI's cybersecurity program will be maintained in compliance with NIST SP 800-171 and CMMC Level 2 requirements, as applicable to VPI's defense contracts.
D. Need-to-Know Protocols
Access to controlled technical data within VPI will be governed by strict need-to-know protocols. Each VPI employee's access to specific categories of controlled technical data will be determined by VPI's Facility Security Officer, Col. (Ret.) Bryce Hendrickson, based on the employee's job responsibilities, security clearance level, and program assignments. Access authorizations will be documented and maintained in a centralized access control database. Periodic reviews of access authorizations will be conducted no less frequently than quarterly to ensure that access is promptly revoked when an employee's need-to-know changes due to reassignment, departure, or other circumstances.
E. TCP Administration and Governance
The TCP will be administered by the Government Security Committee ("GSC") of the reconstituted VPI board of directors. The GSC, composed of the three Security Board Members (all U.S. citizens holding or eligible to hold TS/SCI security clearances), will have exclusive authority to interpret, apply, and enforce the TCP, including the authority to approve or deny any proposed disclosure of controlled technical data. The GSC will report to the full VPI board on TCP compliance matters but will not be required to obtain the consent of HSAG designees for any TCP-related decisions.
F. Annual Compliance Audits
Compliance with the TCP will be subject to annual audit by the proposed third-party compliance monitor, as described further in response to Question 22 below. The third-party compliance monitor will assess VPI's adherence to all TCP provisions, identify any deficiencies or areas of concern, and report findings and recommendations to the GSC, VPI management, and the CFIUS monitoring agencies (DCSA, Treasury, DoD, and DOE). Any deficiencies identified during the annual audit will be promptly remediated pursuant to a corrective action plan approved by the GSC.
G. Permissible Information Sharing with HSAG
The TCP will define the categories of information that HSAG personnel may receive from VPI in connection with HSAG's exercise of ordinary shareholder oversight functions. Permissible information will be limited to uncontrolled business information, including:
• Consolidated and segment-level financial reports (revenue, costs, profitability), prepared in a manner that does not disclose controlled technical data, classified program details, or proprietary process information;
• Non-technical marketing data, including general market positioning, customer sector breakdowns (e.g., defense vs. commercial revenue percentages), and publicly available product literature;
• General operational metrics, such as headcount, facility utilization rates (presented in aggregate without classified program detail), and capital expenditure summaries; and
• Information required for HSAG's financial reporting and regulatory compliance obligations under German and EU law, prepared and reviewed by the GSC to ensure no controlled technical data is included.
All information sharing between VPI and HSAG will be conducted through defined procedures documented in the TCP, which will include review by the FSO or a designated export compliance officer prior to any transmission.
Question 3
Identify all VPI intellectual property developed under U.S. government-funded contracts and describe any restrictions on the transfer of such intellectual property, including government rights under the Bayh-Dole Act and applicable defense acquisition regulations.
Response to Question 3
A. Government-Funded Patents
Of VPI's forty-seven (47) granted U.S. patents, twenty-three (23) were developed, in whole or in part, under contracts funded by the U.S. government, primarily through the Department of Defense (including awards from the Army, Air Force Research Laboratory, Missile Defense Agency, and NAVSEA) and, to a lesser extent, through the Department of Homeland Security Science and Technology Directorate. These twenty-three patents span all three of VPI's principal patent families, with the following approximate distribution:
• GaN-on-SiC Epitaxial Growth Process family: 4 of 8 patents government-funded
• HEMT Gate Structure Optimization family: 12 of 19 patents government-funded
• mmWave Broadband Matching Network family: 7 of 20 patents government-funded
B. Government Rights Under the Bayh-Dole Act
Each of these twenty-three government-funded patents is subject to the provisions of the Bayh-Dole Act, 35 U.S.C. §§ 200–212, and the implementing regulations at 37 C.F.R. Part 401. Under the Bayh-Dole framework, VPI, as a small business contractor that elected to retain title to subject inventions, has the following obligations and the U.S. government retains the following rights:
(i) Government License. The U.S. government retains a nonexclusive, nontransferable, irrevocable, paid-up license to practice, or have practiced for or on behalf of the United States, each subject invention throughout the world. 35 U.S.C. § 202(c)(4). This government license is perpetual and cannot be diminished or extinguished by the Transaction.
(ii) March-In Rights. The U.S. government retains march-in rights under 35 U.S.C. § 203, which permit the relevant funding agency to require VPI to grant a license to a responsible applicant, or to grant such a license itself, under specified circumstances, including where VPI has not taken or is not expected to take effective steps to achieve practical application of the subject invention within a reasonable time, where action is necessary to alleviate health or safety needs, or where VPI has failed to satisfy requirements for public use specified by federal regulation.
(iii) Domestic Manufacturing Preference. Under 35 U.S.C. § 204, any products embodying a subject invention or produced through the use of a subject invention must be manufactured substantially in the United States, unless the funding agency grants a waiver upon a showing that reasonable but unsuccessful efforts have been made to grant licenses to potential licensees that would manufacture substantially in the United States, or that under the circumstances domestic manufacture is not commercially feasible. VPI has complied with this requirement, and all products embodying government-funded subject inventions are currently manufactured at VPI's Albuquerque fab facility.
C. DFARS Requirements
In addition to the Bayh-Dole Act provisions, VPI's defense contracts incorporate the DFARS clause at 252.227-7038 ("Patent Rights — Ownership by the Contractor (Large Business)"), or the small business equivalent, which impose additional reporting and disclosure obligations. VPI has complied with all such obligations, including timely election of title, filing of patent applications, and reporting of subject inventions.
D. iEdison Reporting
VPI confirms that all invention disclosure, election, and reporting obligations under the Interagency Edison (iEdison) system are current as of the date of this submission. VPI's patent counsel has verified that all required submissions — including initial invention disclosures, elections to retain title, confirmatory license filings, and utilization reports — have been made in a timely manner and are reflected in the iEdison database.
E. Post-Closing Compliance
Following the closing of the Transaction, VPI will continue to comply with all U.S. government intellectual property rights arising from government-funded contracts. The proposed NSA and TCP framework will further restrict any transfer of government-funded intellectual property to HSAG or any non-U.S. entity. Specifically:
• Government-funded patents and associated technical data will remain exclusively within VPI and will not be transferred to, or accessible by, HSAG or non-U.S. persons.
• VPI will continue to manufacture products embodying government-funded inventions substantially in the United States, at its Albuquerque fab facility, in compliance with 35 U.S.C. § 204.
• VPI will continue to fulfill all iEdison reporting obligations and respond to any government inquiries regarding subject inventions.
• The GSC will have exclusive authority over matters relating to government-funded intellectual property, ensuring that HSAG designees on the VPI board do not direct or influence decisions relating to such IP.
Question 4
Assess the risk that HSAG could reverse-engineer VPI's proprietary technology through access to VPI's commercial products, and describe any measures to mitigate this risk.
Response to Question 4
A. Nature of HSAG's Existing U.S. Operations
HSAG currently operates one U.S. subsidiary, Halcyon US Inc., located in Austin, Texas. Halcyon US Inc. functions as a fabless semiconductor design center employing approximately 320 people and focuses on silicon-based and silicon-germanium (SiGe) power management integrated circuits and automotive semiconductor design. Halcyon US Inc. does not perform classified work, does not hold a facility security clearance, and has no GaN semiconductor design, manufacturing, or research capabilities. There is no overlap between Halcyon US Inc.'s technology platform and VPI's GaN-on-SiC technology.
B. Technical Barriers to Reverse Engineering
The risk that HSAG could reverse-engineer VPI's proprietary GaN technology through access to VPI's commercial products is assessed as low for the following reasons:
(i) VPI's Core Competitive Advantages Reside in Process Know-How. VPI's competitive differentiation in the GaN-on-SiC power amplifier market stems primarily from its proprietary process know-how — specifically, the epitaxial growth recipes, transistor fabrication techniques, and die-level reliability screening processes described in the response to Question 1. These process-related trade secrets are embedded in VPI's manufacturing operations and are not embodied in, or derivable from, finished semiconductor devices. Device-level reverse engineering of a GaN power amplifier chip — through techniques such as delayering, cross-sectioning, and electron microscopy — may reveal the physical structure and dimensions of the transistor, but it would not disclose the specific process parameters, growth conditions, chamber conditioning protocols, or screening algorithms that enable VPI to achieve its performance and reliability characteristics.
(ii) Material System Incompatibility. HSAG's existing semiconductor operations focus on fundamentally different material systems — primarily silicon and SiGe — and serve different application domains (automotive, industrial, and consumer electronics). The equipment, expertise, and process infrastructure required for GaN-on-SiC fabrication are distinct from those used in silicon-based semiconductor manufacturing. HSAG would not be able to leverage its existing silicon and SiGe manufacturing capabilities to replicate VPI's GaN technology, even if device-level structural information were obtained through reverse engineering. The development of a competitive GaN-on-SiC manufacturing capability from reverse-engineered device structures would require years of process development, substantial capital investment in GaN-specific equipment, and the recruitment of specialized epitaxial growth and GaN process engineering talent — none of which HSAG could accomplish through access to finished products alone.
(iii) Limited Commercial Availability of VPI's Most Sensitive Products. VPI's most sensitive products — those manufactured for classified defense programs — are delivered exclusively to U.S. government end users or to prime defense contractors under government contracts and are not commercially available to HSAG or any other entity. Access to these products is controlled under the terms of the applicable government contracts and security classifications. VPI's commercially available products (e.g., 5G infrastructure power amplifiers) utilize a subset of VPI's technology that does not incorporate the most advanced defense-specific innovations.
C. Mitigation Measures
Notwithstanding the low technical risk described above, the proposed TCP and data segregation provisions will provide additional assurance by preventing HSAG technical personnel from accessing VPI design files, process parameters, test data, simulation models, or any other controlled technical data that could supplement device-level reverse engineering. The combination of technical barriers to reverse engineering and the contractual and procedural safeguards of the TCP renders the risk of HSAG reverse-engineering VPI's proprietary technology through commercial product access negligible.
Question 5
Describe any plans for cross-border R&D collaboration between HSAG and VPI following the closing of the Transaction, and explain how such collaboration would be managed to prevent unauthorized technology transfer.
Response to Question 5
A. VPI's Standalone R&D Operations
HSAG intends to maintain VPI as a standalone U.S. operating subsidiary with its own independent research and development operations. VPI's R&D activities will continue to be conducted at VPI's existing facilities in Colorado Springs and Albuquerque by VPI's U.S.-person engineering staff. HSAG does not intend to consolidate, merge, or integrate VPI's R&D functions with HSAG's R&D operations in Germany or elsewhere outside the United States.
B. Limited Cross-Border Collaboration, If Any
Any cross-border R&D collaboration between HSAG and VPI, should it occur, would be strictly limited to uncontrolled, commercially available technology and would be subject to the following requirements:
• All proposed cross-border R&D activities would be reviewed and approved in advance by the Government Security Committee and VPI's export compliance officer to ensure that no controlled technical data — whether ITAR-controlled, EAR-controlled, or classified — would be disclosed to non-U.S. persons.
• Only technology that has been affirmatively determined to be outside the scope of the ITAR (i.e., not defense articles or defense services) and outside the scope of EAR controls (i.e., designated as EAR99 or otherwise not subject to license requirements for the relevant destination) would be eligible for cross-border collaboration.
• TCP procedures would require written documentation of the scope and content of any proposed collaboration, a commodity jurisdiction or classification determination for all technology involved, and a formal approval from the GSC prior to commencement.
C. Acquisition Rationale
It is important to note that HSAG's strategic rationale for acquiring VPI is not predicated on integrating VPI's defense GaN technology into HSAG's commercial product lines. Rather, the acquisition is intended to expand HSAG's addressable market by adding VPI's defense and 5G infrastructure revenue base to HSAG's existing commercial semiconductor business, while maintaining VPI's operational independence and preserving its ability to serve U.S. government customers. HSAG recognizes that VPI's value as a defense supplier depends on its ability to maintain its security clearances, export control compliance, and trusted relationships with U.S. government agencies — all of which would be undermined by imprudent cross-border technology integration.
D. Future Collaboration Requiring Authorization
In the event that HSAG or VPI identifies a future opportunity for cross-border R&D collaboration that would involve controlled technology, such collaboration would not proceed without first obtaining the required U.S. government authorization, whether in the form of an ITAR license from DDTC, an EAR license from BIS, or a modification to the NSA approved by the Committee. The pre-notification provisions proposed for the NSA would ensure that the Committee is informed of any significant changes to the scope of VPI's business activities or its relationship with HSAG, including any new cross-border collaboration initiatives.
Question 6
Describe the specific measures that will be implemented to protect VPI's trade secrets from unauthorized disclosure to HSAG and other non-U.S. persons following the closing of the Transaction.
Response to Question 6
A. VPI's Existing Trade Secret Management Program
VPI has maintained a formal Trade Secret Management Program since 2014, under which all trade secrets meeting the criteria of the Defend Trade Secrets Act of 2016, 18 U.S.C. § 1836, and the Colorado Uniform Trade Secrets Act, Colo. Rev. Stat. §§ 7-74-101 to 7-74-110, are identified, catalogued, and subject to defined protection measures. As noted in the response to Question 1, VPI currently maintains thirty-one (31) registered trade secrets, each assigned a unique identifier, a sensitivity classification, and a designated access control level. VPI's existing trade secret protections include physical access restrictions, electronic access controls, non-disclosure agreements with all employees having access to trade secret materials, and periodic assessments of trade secret inventory and protection adequacy.
B. Post-Closing Enhancements
Following the closing of the Transaction, VPI proposes to implement the following enhanced trade secret protection measures as part of the TCP and NSA framework:
(i) Reinforced Physical Access Controls. Access to areas of VPI's facilities where trade secret materials are stored or utilized will be restricted through badge-controlled entry, biometric authentication (fingerprint or iris scan), and visitor escort requirements. Trade secret materials relating to VPI's GaN epitaxial recipes and die-level reliability screening processes are maintained exclusively at the Albuquerque fab facility, within areas subject to facility security clearance requirements and access restrictions administered by the FSO. These areas — specifically, clean room Sections C-7 through C-12 and the adjacent process engineering offices — will be designated as restricted zones to which HSAG personnel (including HSAG designees on the VPI board) will not have access.
(ii) Enhanced Cybersecurity Measures. Electronic copies of trade secret materials will be stored in encrypted form on dedicated, access-controlled servers within VPI's standalone IT infrastructure. Access logging will be implemented to create an auditable record of every instance in which a VPI employee accesses trade secret files, including the identity of the user, the date and time of access, the specific files accessed, and any actions taken (viewing, copying, printing, downloading). Anomalous access patterns will be flagged for review by VPI's cybersecurity team and the FSO.
(iii) Enhanced Employee Exit Protocols. Upon separation from VPI — whether voluntary or involuntary — all employees who have had access to VPI trade secrets will be subject to enhanced exit protocols, including: a comprehensive exit interview conducted by the FSO or a designee; confirmation of return of all company property, devices, and materials; a reminder of continuing obligations under the employee's non-disclosure agreement; and execution of a certification acknowledging the employee's ongoing duty to protect VPI trade secrets. Post-employment restrictions, including non-competition and non-solicitation provisions, will be enforced to the extent permitted by applicable law. VPI will also implement a monitoring protocol for departing employees who accept employment with competitors or foreign-owned entities, with notification to the GSC if such a transition raises trade secret risk concerns.
(iv) Need-to-Know Access Logging. A comprehensive need-to-know access logging system will be implemented for all trade secret materials. Access to individual trade secrets will be granted only to VPI employees who have a documented business need to access the specific trade secret in connection with their assigned duties. Access authorizations will be reviewed no less frequently than quarterly and promptly adjusted upon any change in the employee's role or program assignment.
(v) Annual Compliance Audits. The third-party compliance monitor will include trade secret protection measures in its annual audit scope. The audit will assess the adequacy and effectiveness of VPI's trade secret protection measures, including physical and electronic access controls, employee compliance with non-disclosure obligations, and the integrity of access logging systems.
C. Board-Level Protections
HSAG designees on the reconstituted VPI board of directors will not have access to trade secret materials. The Government Security Committee — composed exclusively of the three Security Board Members — will have exclusive authority over all matters implicating trade secrets related to classified or export-controlled programs. This governance structure ensures that decisions regarding the protection, use, and disposition of VPI's trade secrets will be made exclusively by U.S. persons with appropriate security clearances and need-to-know authorizations, without the involvement or influence of non-U.S. HSAG personnel.
Question 7
Describe the impact of the Transaction on VPI's twelve (12) pending patent applications, including how patent prosecution will be managed post-closing and what measures will be taken to protect controlled technical data contained in patent application files.
Response to Question 7
A. Ownership Continuity
VPI's twelve (12) pending U.S. patent applications will remain the property of VPI following the closing of the Transaction. Ownership of these patent applications will not be transferred to HSAG, Halcyon US Holdings, or any other entity. VPI will continue to be the named applicant and, upon grant, the named assignee of all pending patent applications.
B. Patent Prosecution Management
Patent prosecution for VPI's pending applications will continue to be handled by U.S.-based patent counsel. VPI has engaged U.S. patent attorneys with the requisite security clearances and export compliance training to handle patent applications containing controlled technical data. No non-U.S. HSAG personnel will be involved in the prosecution of VPI's patent applications, including in the preparation of responses to office actions, the drafting of continuation or divisional applications, or any communications with the U.S. Patent and Trademark Office.
C. Invention Disclosure Obligations
For pending patent applications that relate to inventions developed under government-funded contracts, VPI will continue to comply with all invention disclosure obligations, including the timely reporting of subject inventions through the iEdison system as required by 35 U.S.C. § 202(c)(1) and applicable contract clauses. Patent prosecution activities for government-funded inventions will be coordinated with VPI's contracts management team to ensure compliance with government notification and reporting requirements.
D. Protection of Controlled Technical Data in Patent Files
Patent application files, including patent specifications, drawings, inventor declarations, and correspondence with the USPTO, may contain controlled technical data subject to the ITAR or EAR. The TCP will govern access to such patent application files, ensuring that they are stored, accessed, and handled in accordance with the same security and export control requirements applicable to other categories of VPI's controlled technical data. Specifically:
• Patent application files containing controlled technical data will be stored within VPI's secure IT infrastructure and accessible only by authorized U.S.-person VPI employees and U.S.-based patent counsel.
• HSAG personnel will not have access to patent application files.
• Any communications between VPI and its patent counsel regarding pending applications will be conducted through secure, U.S.-based communication channels.
• Prior to filing any patent application with the USPTO, VPI's export compliance officer will review the application to confirm compliance with all applicable export control requirements, including the requirement to obtain a foreign filing license under 35 U.S.C. § 184 if applicable. VPI has historically filed only U.S. patent applications and does not anticipate filing foreign patent applications for defense-related inventions.
IV. SECTION B — SUPPLY CHAIN DEPENDENCIES (Questions 8–13)
The following responses address Questions 8 through 13 of the Second RFI, which concern VPI's supply chain for critical materials and components, supply chain vulnerabilities, VPI's role in the defense industrial base, and export compliance measures for supply chain management.
Question 8
Provide a comprehensive map of VPI's supply chain for critical materials, identifying all suppliers, their countries of origin, and the specific materials or components supplied.
Response to Question 8
A. Supplemental Exhibit
A detailed VPI Supply Chain Map has been prepared and is being filed concurrently with this submission under separate cover as a Supplemental Exhibit. The Supply Chain Map is provided in spreadsheet format and includes, for each critical material and component supplier, the supplier name, country of origin, location of manufacturing or sourcing, the specific material or component supplied, the classification (commercial vs. defense), the tier level (Tier 1, Tier 2), and the status of any alternative or secondary sourcing arrangements. The Supply Chain Map is classified as confidential business information and is subject to the same protections as other confidential materials submitted to the Committee.
B. Summary of Critical Material Categories
For the Committee's convenience, the following summary provides an overview of VPI's critical material supply chain by category:
(i) SiC Substrates. VPI's SiC substrates — the foundation upon which GaN epitaxial layers are grown — are sourced exclusively from U.S.-based suppliers. VPI utilizes multiple grades of semi-insulating SiC substrates depending on the application and performance requirements. All SiC substrate suppliers are U.S. companies with U.S.-based manufacturing facilities.
(ii) GaN Epitaxial Materials. Precursor chemicals, source materials, and specialized components used in VPI's metal-organic chemical vapor deposition (MOCVD) epitaxial growth process are sourced from a combination of U.S.-based and allied-nation (Japan) suppliers. Japanese suppliers provide certain high-purity metal-organic precursors that are recognized globally as best-in-class for GaN epitaxial growth. All Japanese suppliers are private-sector entities operating under Japan's export control framework, and Japan is a close U.S. ally and member of the Wassenaar Arrangement.
(iii) Semiconductor Packaging and Assembly. VPI's semiconductor packaging and assembly services — including die attach, wire bonding, hermetic sealing, and package testing — are performed by U.S.-based and allied-nation (United Kingdom) suppliers. VPI's primary packaging supplier is a U.S.-based company with defense-qualified packaging capabilities. A secondary packaging supplier in the UK provides packaging services for certain commercial-grade products and is qualified under applicable quality standards.
(iv) Test and Measurement Equipment. VPI's test and measurement equipment — including vector network analyzers, spectrum analyzers, load-pull measurement systems, and wafer probers — is primarily sourced from U.S.-based equipment manufacturers. VPI also utilizes certain test equipment manufactured by allied-nation (German and Japanese) companies.
(v) Specialty Gases and Chemicals. Specialty gases (including ammonia, hydrogen, nitrogen, and metal-organic precursors) and chemicals (including photoresists, etchants, and cleaning solvents) used in VPI's fabrication processes are sourced from U.S.-based suppliers.
C. Absence of Non-Allied Nation Dependencies
As documented in the Supplemental Exhibit and summarized above, VPI has no dependencies on Chinese, Russian, or other non-allied nation sources for any critical materials or components in its supply chain. All critical materials and components are sourced from U.S.-based or allied-nation (Japan, United Kingdom, Germany) suppliers. This supply chain configuration reflects VPI's long-standing commitment to maintaining a secure and trusted supply chain consistent with the requirements of its defense contracts and the expectations of its DoD and other government customers.
Question 9
Identify and assess any supply chain vulnerabilities, including single-source supplier dependencies, and describe any measures being taken to address such vulnerabilities.
Response to Question 9
A. Single-Source Dependencies
VPI has conducted an internal supply chain risk assessment and has identified three (3) single-source supplier relationships for specialty SiC substrate grades used in its highest-performance defense products. These three single-source relationships pertain to specific substrate specifications — including crystal orientation, resistivity, and micropipe density requirements — that are particularly demanding and for which only one qualified supplier currently exists. All three single-source suppliers are U.S.-based entities with U.S.-based manufacturing facilities. VPI does not have single-source dependencies on any non-U.S. supplier.
B. Supplier Diversification Efforts
VPI recognizes the risk inherent in single-source dependencies and has been actively pursuing supplier diversification efforts for the three identified single-source relationships. As of the date of this submission:
• VPI has qualified one additional U.S.-based SiC substrate supplier for secondary sourcing of one of the three specialty substrate grades. This secondary source has completed VPI's supplier qualification process, including material characterization, device fabrication trials, and reliability testing, and is expected to begin production deliveries in the first quarter of 2024.
• VPI has qualified one Japanese SiC substrate supplier for secondary sourcing of another of the three specialty substrate grades. This Japanese supplier is a well-established SiC substrate manufacturer with demonstrated capability to meet VPI's specifications. Japan's status as a close U.S. ally and its robust export control framework provide assurance that this supply relationship is consistent with U.S. national security interests.
• The third single-source dependency relates to an ultra-low-micropipe-density substrate specification for which no alternative supplier has yet been qualified. VPI is in discussions with two potential alternative suppliers (one U.S.-based and one European) regarding qualification, but the qualification process for this specification is expected to require 12 to 18 months.
C. Supply Chain Transit