[Exclusive] MagnaChip Sale Virtually Collapsed... US Judges "National Security Risk Exists"

The acquisition of MagnaChip Semiconductor by a China-based private equity fund has effectively fallen through. This is because the U.S. government has determined that there are national security risks associated with the MagnaChip Semiconductor merger and acquisition (M&A), making it highly likely that U.S. President Joe Biden, who has taken a tough stance against China, will ultimately decide to 'deny approval.' This is expected to become a representative case revealing the deepening U.S.-China conflict over global semiconductor dominance.

According to disclosure documents submitted by MagnaChip to the U.S. Securities and Exchange Commission (SEC) on the 30th (local time), the U.S. Treasury Department sent a letter on the 27th on behalf of the Committee on Foreign Investment in the United States (CFIUS) to MagnaChip and others, stating that "CFIUS has identified risks to U.S. national security arising from the sale of MagnaChip." Since MagnaChip signed a stock purchase agreement worth $1.4 billion (approximately 1.6 trillion KRW) with the China-based private equity fund Wise Road Capital in March, CFIUS began investigating the MagnaChip sale in May and has been conducting the investigation until recently. The investigation aimed to assess the impact of Chinese capital acquiring a company possessing semiconductor technology on U.S. national security.

The U.S. Treasury Department evaluated the transaction as posing a national security risk and emphasized that MagnaChip had not presented any measures to eliminate this risk. The Treasury Department stated in the letter, "Including the proposals submitted by MagnaChip, CFIUS has not identified any measures that it can determine would mitigate this risk."

Based on CFIUS's decision, the final authority on the acquisition of MagnaChip by Chinese capital is expected to rest with President Biden. CFIUS stated, "If no new information arises during the investigation period that would change the assessment of national security risks or related mitigation measures, this matter is expected to be referred to the President." Since President Biden has repeatedly imposed brakes on China's semiconductor ambitions shortly after taking office, increasing pressure and checks on China, it is unlikely that he will overturn CFIUS's decision and approve the acquisition.

Additionally, CFIUS mentioned in the letter that MagnaChip could submit additional information, such as proposals that could permanently mitigate national security risks. Some speculate that MagnaChip might voluntarily terminate the sale agreement before the President's decision is made. This is because it is realistically difficult to present measures that could overturn the U.S. government's conclusion that the deal undermines national security.

Following this U.S. judgment, the review of the MagnaChip sale being conducted by South Korea's Ministry of Trade, Industry and Energy is also expected to be affected. MagnaChip submitted sale-related documents to the Ministry on the 20th of last month and is currently undergoing related procedures. However, since the MagnaChip sale requires approval from all relevant countries including the U.S., South Korea, and China, the contract cannot be finalized without U.S. approval. Earlier, China's antitrust authority, the State Administration for Market Regulation (SAMR), announced approval of the deal in June.

Regarding the U.S. decision, MagnaChip stated, "We are considering the next steps," and emphasized that nothing has been finalized in any direction.

MagnaChip was established in 2004 when Hynix Semiconductor (now SK Hynix) spun off its system business division. It was acquired by U.S. Citigroup Venture Capital and listed on the New York Stock Exchange (NYSE) in 2011. Last year, it sold its foundry (semiconductor contract manufacturing) business and currently designs and manufactures semiconductors for communication, Internet of Things (IoT), automotive applications, including OLED DDI.

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