Korea-US-China 'Hot Potato' MagnaChip Semiconductor Sale Shows Signs of Prolonged Delay

Various Legal Interpretations on Approval Authority Between Korea and the US
MagnaChip "No Separate Approval Needed but Will Cooperate"
Delayed or Denied Approval Could Prolong Sale and Lead to Legal Disputes

[Asia Economy Reporter Suyeon Woo] The sale of MagnaChip Semiconductor (hereafter MagnaChip), which has emerged as a "hot potato" in the semiconductor industries of Korea, the United States, and China, shows signs of prolonged delay. While the Korean and U.S. governments, concerned about technology leakage to China, have expressed their intention to intervene in this merger and acquisition (M&A), MagnaChip maintains that the sale is legally sound, raising prospects of future legal disputes.

According to industry sources on the 8th, MagnaChip officially stated that approval from the U.S. Committee on Foreign Investment in the United States (CFIUS) and Korea’s Ministry of Trade, Industry and Energy is not a legal requirement for the sale, sparking controversy over the effectiveness of approval from both governments. The reason for this controversy lies in the fact that MagnaChip’s assets (in Korea) and capital (in the U.S.) are separated between the two countries, allowing for various legal interpretations.

MagnaChip is a U.S.-listed company but has no factories or intellectual property (IP) within the U.S., so it argues that separate approval from CFIUS is unnecessary. Conversely, since there is no overseas transfer (leakage) of assets in Korea, it maintains that, in principle, approval from Korea’s Ministry of Trade, Industry and Energy is also not required. More precisely, it added that the final approval from the U.S. Securities and Exchange Commission (SEC) is important because the major shareholder of the U.S.-listed company is changing from a U.S.-based private equity fund to a China-based one.

However, the industry views the sale as practically impossible without final approval from both CFIUS and Korea’s Ministry of Trade, Industry and Energy. The results of CFIUS’s review inevitably influence the SEC’s decision, and if Korea’s Ministry of Trade, Industry and Energy designates MagnaChip’s technology as a national core technology, this sale could also be subject to review under the Industrial Technology Protection Act. MagnaChip’s statement that "while there is no fundamental need for approval, we will cooperate with all review procedures of both governments" is interpreted as considering this situation.

Nevertheless, MagnaChip’s emphasis on the ‘fundamental necessity of approval’ from both governments regarding their review is also seen as a strategic move anticipating future legal battles. Experts argue that even a simple change of major shareholders between private equity funds could be subject to domestic Industrial Technology Protection Act regulations if there is a possibility of leakage of core assets (IP).

Professor Seungwoo Son of the Department of Industrial Security at Chung-Ang University said, "It is necessary to focus on the fact that this sale grants Chinese capital substantial control that could lead to leakage of Korean technology," adding, "If, as MagnaChip claims, there is no concern about technology leakage, an alternative could be for the Korean Minister of Trade, Industry and Energy to grant conditional approval with clauses preventing technology leakage."

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