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Regulators’ decision to investigate Tsinghua Holdings’ now-defunct $3.8 billion investment in Western Digital ( WDC ) could signal “a heightened sense of scrutiny on all Chinese investments in U.S. technology,” a Macquarie analyst wrote Tuesday. That’s sure to frustrate Micron Technologies ( MU ) which, analysts say, could be examining a joint venture with a Chinese partner. Last year, Micron reportedly rebuffed a $23 billion bid from Tsinghua Holdings’ chip-arm, Tsinghua Unigroup. MKM analyst Ian Ing says Micron could seek to become a “ local supplier ” for the Chinese memory market by entering a JV. A JV stands a better chance of getting approval from the Committee on Foreign Investment in the United States. But the CFIUS is increasingly wary of Chinese investments in U.S. technology, Macquarie analyst Deepon Nag wrote in a research report. Tsinghua Unigroup plans to invest $47 billion to oust Apple ( AAPL )-supplier Qualcomm ( QCOM ) from its No. 3 chipmaking slot. “We see increased risk that Chinese investment in U.S. semiconductor assets won’t be allowed to take place, which we believe is an incremental negative for Micron,” Nag wrote. Unisplendour Playing For SanDisk? Early Tuesday, Tsinghua Holdings subsidiary Unisplendour pulled its $3.8 billion funding in Western Digital after CFIUS regulators decided to investigate the investment. Nag sees little chance of IP theft in such a “passive investment,” but other analysts have suggested that Unisplendour was making a play for SanDisk ‘s ( SNDK ) coveted Nand technology. Western Digital announced its plan to acquire SanDisk a month before Unisplendour was to invest the $3.8 billion for a 15% stake in Western Digital. “Tsinghua put $3.8 billion in Western Digital so they would have SanDisk technology,” Summit Research analyst Srini Sundararajan told IBD in December. On Wednesday, Sundararajan said the Western Digital-SanDisk deal would proceed without Unisplendour. It’s a marriage of “necessity and convenience,” he wrote in a report. Western Digital investor Alken Asset Management opposes the transaction , claiming the price is too high and SanDisk faces an uphill Nand battle, but the objection “comes a bit late.” Toshiba and SanDisk have made rapid progress in 3D Nand, Sundararajan says. And SanDisk has “gobs of Nand IP” plus licensing sales to justify the price. Western Digital cut the price Tuesday after Unisplendour’s exit to about $78.50 per share. Shareholders are set to vote on the transaction March 15. If it fails, Western Digital will have to pay a $184 million fee. “We find that net-net most of the objections expressed by Alken, while legitimate, ignore the strategic importance to Western Digital of having a captive Nand source as well as in-house Nand IP and a well-trained group of Nand experts,” Sundararajan wrote. Will Western Digital Cut Its SanDisk Bid? But Nag says the Unisplendour exit gives Western Digital the opportunity to reduce or completely drop the SanDisk deal. Out of 280 tech M&A deals in the past 30 years, nearly 10% were ultimately revised downward, he wrote. And considering Western Digital’s slough in stock price — down 43.5% since the deal was announced — the acquisition will likely be dilutive, Nag wrote. On Tuesday, RBC Capital Markets analyst Amit Daryanani estimated that the transaction would be 34% dilutive without the Unisplendour investment. “As a result, we believe that Western Digital will be highly motivated to renegotiate the price of SanDisk lower,” Nag wrote. On the stock market today , SanDisk stock rebounded 4.9% to close at 69.90, after closing down 1.6% on Tuesday. Western Digital stock rose 2.7% vs. a 7.2% decline Tuesday.