Such a decision is rare, and Trump's move marks only the fourth time in the past 27 years that a president has blocked a deal like this. In the case of Portland, Oregon-based Lattice, the buyer would have been Canyon Bridge Capital Partners, which is backed by China Venture Capital Fund Corporation Limited, which the White House said is "owned by Chinese state-owned entities."
American presidents are empowered to stop the sale of domestic companies to foreign buyers if there is a potential threat to national security — either because of what the U.S. company does, or due to the nature of the would-be buyer.
In a statement, the White House said, in this case, "the national-security risk posed by the transaction relates to, among other things, the potential transfer of intellectual property to the foreign acquirer, the Chinese government's role in supporting this transaction, the importance of semiconductor supply chain integrity to the United States Government, and the use of Lattice products by the United States Government."
Lattice's stock fell about 1 percent in after-hours trading on news of the blocked sale.
The decision, first reported by Bloomberg, came as the Trump administration is in the process of reviewing a number of potential sales of U.S. firms to Chinese buyers. The core reviewing body for such sales is the Committee on Foreign Investment in the United States, which makes recommendations to the president.
In a statement, Canyon Bridge said it was "disappointed in Trump's decision to "forgo what we believe to be an excellent deal for Lattice's shareholders and its employees by expanding the opportunity to keep jobs in America."
—CNBC's Jim Forkin contributed to this report.