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UPDATE 1-Trump bars Chinese firm from buying U.S. chipmaker Lattice

Sept 13 (Reuters) - U.S. President Donald Trump blocked a Chinese-backed private equity firm from buying a U.S. chipmaker on Wednesday, sending a clear signal to Beijing that Washington will oppose deals that involve technologies with potential military applications. Canyon Bridge Capital Partners planned $1.3-billion acquisition of Lattice Semiconductor Corp was one of the largest attempted by a Chinese-backed firm in the U.S. chip sector and was the first announced deal for the Palo Alto-based firm, which launched last year with a focus on technology investments.

U.S. regulatory scrutiny grew after Reuters reported in November that Canyon Bridge was funded partly by cash from Chinas central government and had indirect links to its space program.

U.S. defense officials subsequently raised concerns about the Lattice acquisition by a firm backed by the Chinese government. The Portland, Oregon-based company makes chips known as field-programmable gate arrays, which allow companies to put their own software on silicon chips for different uses. It no longer sells chips to the U.S. military, but its two biggest rivals, Xilinx Inc and Intel Corp's Altera, do.

Trump said in an executive order that Lattice and Canyon Bridge "shall take all steps necessary to fully and permanently abandon the proposed transaction," within 30 days.

Lattice and Canyon Bridge did not immediately respond to a request for comment.

The announcement comes at a sensitive time for U.S.-China relations. Relations are already strained between Washington and Beijing over trade and North Korea, and the Chinese communist party is preparing to hold its once-every-five-years congress in October.

Trumps decision chimes with the views of the Committee on Foreign Investment in the United States (CFIUS), which scrutinizes deals for potential national security threats. Canyon Bridge and Lattice spent eight months trying in vain to persuade CFIUS to clear the acquisition.

Both companies said the deal did not pose any security risks and Canyon Bridge had told CFIUS it would double the number of Lattices employees in a bid to make the deal more palatable, according to people familiar with the matter. They declined to be identified because details of the regulatory process are confidential.

(Reporting by Liana B. Baker in New York and Diane Bartz in Washington; Editing by Nick Zieminski)