The U.S. Treasury Department stated that a Chinese private equity firm’s acquisition of system chip manufacturer Magnachip semiconductor constitutes a “national security risk.” Reuters commented that this is another obstacle for Chinese companies trying to invest in key overseas technology industries.
In March of this year, Chinese private equity firm Wise Road Capital agreed to acquire South Korean chip maker Magna Semiconductor for US$1.4 billion.
The transaction was originally expected to be completed in the second half of this year, but has since been subject to review by US and South Korean regulators.
At the end of May, Magna Semiconductor pointed out in an announcement that they had received an email from the Chairman of the Committee on Foreign Investment in the United States (CFIUS) requesting that both parties to the transaction submit a statement on the merger to accept formal review by CFIUS.
Although Magna Semiconductor stated in the announcement that the transaction itself does not require US approval, because all of the company’s manufacturing and R&D activities are carried out in South Korea, and all sales activities are carried out in South Korea. But the company still plans to cooperate with CFIUS’s review requirements.
On August 30, Magna Semiconductor stated in a document submitted to the U.S. Securities and Exchange Commission (SEC) that the U.S. Treasury Department wrote to the company’s legal counsel last Friday, stating that the acquisition “posed a risk to U.S. national security.” , Is expected to seek a decision on this matter from US President Biden (Joe Biden).
People familiar with the situation in South Korea said that because the Biden administration has been putting pressure on China’s intention to develop its own semiconductor industry, they expect the transaction to fail.
CFIUS, a subsidiary of the US Treasury Department, ordered the suspension of this transaction in June.
The documents submitted to the SEC did not specify the nature of the risk.
According to the document, Magna Semiconductor is evaluating its next steps, but there is no guarantee that it will agree to a proposal that will help obtain CFIUS approval. A spokesperson for Magna Semiconductor declined to comment further.
Magna Semiconductor is mainly engaged in the production of OLED Display driver ICs (DDI) and automotive power control power semiconductors. According to data from the market research organization Omida, Magna’s market share in the field of OLED Display driver chips is 33.2% in 2020. After Samsung Electronics, it ranks second in the world.
Since Magna Semiconductor is also a major supplier of OLED panel driver chips for Samsung and LG Display, this acquisition has also caused concerns among the Korean people and the industry.
After the acquisition of Magna Semiconductor by Zhilu Capital in March of this year, Koreans worried about the leakage of technology to China and initiated a petition on the official website of the Presidential Palace to ask President Moon Jae-in to block the acquisition. At that time, there were more than 5,000 people. Co-sign.
According to the official website, Zhilu Capital is headquartered in Beijing. It is a global professional equity investment institution focusing on semiconductor core technology and other emerging high-end technology investment opportunities. The company’s investors include high-tech companies, large financial institutions and family funds, etc. .
The global chip shortage has led to a slowdown in production in the automotive and technology industries, prompting calls for the United States to reduce its dependence on China, and leading to efforts such as the passage of the “American Innovation and Competition Act” by the U.S. Senate, which authorizes approximately $190 billion to strengthen U.S. technology And research regulations.
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