[New Wave] Reasons to Worry About the Sale of MagnaChip

In 2018, the Trump administration in the United States blocked Broadcom's acquisition of Qualcomm, Qualcomm's flagship 5G new technology, citing concerns over potential leaks and threats to U.S. national security. Although it was a transaction between American companies, Broadcom was seen as controlled by Chinese and Asian capital, raising fears that control over Qualcomm could lead to the leakage of core technology.

Globally, there is an unprecedented semiconductor shortage affecting all industries including automobiles, home appliances, and computers. Critical components such as display driver chips are in extremely short supply. Especially due to the trade conflict between the U.S. and China, the U.S. has imposed measures to block semiconductor supplies to Huawei, causing China to face a major crisis. Meanwhile, on March 25, a contract was signed to sell all shares of MagnaChip Semiconductor's U.S. headquarters to a Chinese private equity fund (PEF) for $1.4 billion (1.6 trillion KRW). The Chinese private equity fund appears to be in a position where it must acquire the company at a price several times higher than the offers made by SK Hynix, DB Hitek, and others who initially expressed interest in acquiring MagnaChip. However, the Korean subsidiary MagnaChip holds production technology for display driver ICs (DDIC), and especially in the field of organic light-emitting diode (OLED) DDICs?a new technology applied to smartphones and TVs?it is the world's second-largest company after Samsung Electronics. MagnaChip's DDICs are used by Samsung Display and LG Display.

Voices of concern over the acquisition of MagnaChip by Chinese capital are emerging everywhere. On March 31, opposition lawmakers from the National Assembly's Industry, Trade, Energy, Small and Medium Enterprises Committee, including Rep. Gu Ja-geun of the People Power Party, issued a statement opposing the overseas leakage of national core technology through the sale to China. A petition against the sale was posted on the Blue House's public petition board, garnering about 34,000 signatures. Additionally, companies like Samsung Display, which outsource production to MagnaChip, are worried that this sale could lead to the leakage of their unique technologies.

We have experienced the leakage of core technologies in the past through incidents such as the Hydis case and the SsangYong Motor case. In the early 2000s, Hydis, the predecessor of Hynix Semiconductor's liquid crystal display (LCD) division, was acquired by China's BOE. BOE, having secured Hydis's display manufacturing technology, rapidly grew to a level that threatened Samsung Display and LG Display. Also, after Shanghai Automotive acquired SsangYong Motor in 2004, it failed to fulfill domestic investment commitments and withdrew after filing for court receivership, intensifying controversies over the leakage of advanced technologies such as hybrid technology.

Having endured these painful experiences, the importance of 'industrial security' has been recognized, and fortunately, the 'Act on Prevention and Protection of Industrial Technology Leakage' has recently been revised to regulate technology acquisition through mergers and acquisitions. MagnaChip is a domestic company possessing core semiconductor technology that operates OLED panels, holding over 3,000 technology patents and collaborating with more than 350 partner companies. The government must examine whether this acquisition by a Chinese private equity fund adversely affects the display market, where Korea still holds a comparative advantage, and seek solutions from diplomatic and security perspectives with the United States.

Seungwoo Son, Professor, Department of Industrial Security, Chung-Ang University

This content was produced with the assistance of AI translation services.