China’s acquisition of South Korean semiconductor manufacturers, the United States to review!

Recently, South Korea’s Magna semiconductor stated that China’s Zhilu Fund’s acquisition plan of the company will need to be reviewed by the Committee on Foreign Investment in the United States (CFIUS)!

Magna disclosed in the filing that it received an email from the U.S. Treasury Department on May 26 asking parties to file a notice with CFIUS. Magna said that while it still believes the acquisition does not require any U.S. regulatory approval, it plans to comply with the CFIUS request.

On March 29 this year, South Korean semiconductor manufacturer MagnaChip Semiconductor announced that it would accept the acquisition proposal of Chinese investment fund Zhilu Capital. Smart Road Capital will acquire all of MagnaChip’s shares for $1.4 billion.

South Koreans call for the South Korean government to intervene in the censorship

As soon as the news of Zhilu Capital’s acquisition of Magnachip was announced, it attracted widespread attention from Koreans. Recently, a petition thread titled “To prevent the leakage of national semiconductor core technology, Magnachip should terminate the sale to Chinese capital” appeared on the Qingwatai National Petition website. More than 5,000 South Koreans agreed with the petition and wanted the South Korean government to block the deal.

The petition mentioned the case of BOE’s acquisition of the LCD business of South Korea’s Hyundai Display Co., Ltd. (HYDIS) in 2017. It pointed out that after BOE’s acquisition of HYDIS, it has gradually climbed to the world’s first position in the LCD field, while local Korean manufacturers have withdrawn from the market one after another. Therefore, the petition posted that South Korea’s national semiconductor core technology may be leaked.

The petition further pointed out that if Magnachip is successfully sold, it may become an opportunity for China to rapidly improve the strength of OLED driver chips and power semiconductors. This will have a certain impact on South Korea’s semiconductor and display industries in the future, as well as South Korea’s national competitiveness. The poster emphasized that the technology monopoly competition between China and the United States is becoming increasingly fierce, and the South Korean semiconductor industry is also in a difficult situation. If the South Korean government approves the sale of local semiconductor companies to China, it may cause international problems in the future. There is thus an urgent need for protection at the national level.

For Koreans’ concerns, Magnachip thinks it is obviously excessive. Magnachip pointed out that although the Chinese fund is a major shareholder of Zhilu Capital, there are clearly too many concerns. Because Zhilu Capital has never intervened in enterprise management and R&D. Magnachip also pointed out that Zhilu Capital's acquisition of NXP Semiconductors' standard product division in 2016 did not interfere with corporate management and R&D, which developed based on an independent operation model. After Magnachip is acquired, the headquarters will remain in South Korea and will also operate independently.

In order to appease the opposition of the Korean people, the Korean Ministry of Trade, Industry and Energy has recently launched an investigation into the proposed acquisition of Magnachip by Zhilu Capital. According to BusinessKorea, in order to examine whether Magnachip has mastered South Korea’s national core technology, the Korean Ministry of Trade, Industry and Energy has recently asked the company to provide relevant technical data. This also means that the South Korean government may step in to block the deal.

At present, the South Korean government has not publicly intervened in the review, but the US CFIUS has intervened in advance.

It is reported that Magna Semiconductor’s parent is South Korean chip giant LG Semiconductor, which was independent from SK Hynix’s non-semiconductor memory business unit in 2004. At present, Magna Semiconductor has world-class technical capabilities, and has 5 fabs in South Korea, mainly dedicated to the production of display driver integrated circuits. Reports point to Magna’s world-class manufacturing capabilities and an extensive portfolio of thousands of patents. It can be seen that although Chinese capital acquired the company at a premium, it may help promote the localization of chips in my country.

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