Intensifying US-China Conflict Over Semiconductor Industry M&A... Fierce Hegemony War

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] As the United States and China engage in fierce battles over global semiconductor supremacy, mergers and acquisitions (M&A) in the semiconductor industry are also being affected. With antitrust regulatory authorities in relevant countries strengthening their approval reviews required for M&A, cases of deals falling through are increasing, causing growing concerns within the industry.

According to the semiconductor industry on the 4th, MagnaChip Semiconductor revealed that the U.S. Department of the Treasury sent a letter at the end of last month on behalf of the Committee on Foreign Investment in the United States (CFIUS). In the letter, the Treasury stated, "CFIUS has identified risks to U.S. national security arising from the sale of MagnaChip," and that MagnaChip has not presented any measures to eliminate these risks.

This is the U.S. Treasury's judgment on the stock purchase agreement made in March between the Chinese private equity firm Wise Road Capital and MagnaChip. The sale of MagnaChip requires approval from all relevant countries, including the U.S., South Korea, and China. The industry believes it will be difficult for U.S. President Joe Biden, who will make the final decision, to overturn the Treasury's judgment under these circumstances.

Since taking office, the Biden administration has pursued a tough stance on China comparable to that of the Trump administration. In July, President Biden pressured the Dutch government to prevent ASML, which sells extreme ultraviolet (EUV) equipment necessary for semiconductor microprocessing, from selling equipment to China. The administration is also strengthening checks on China by building supply chain alliances with countries such as South Korea and Japan.

[Image source=AP Yonhap News]

China criticized the U.S. Treasury's judgment on MagnaChip as "setting a dangerous precedent." The Chinese state-run media Global Times recently editorialized, "If the U.S. succeeds in blocking this deal, it will set a very bad precedent for global advanced technology mergers and acquisitions."

However, China has previously blocked U.S. semiconductor companies' M&A approvals. In October 2016, U.S. semiconductor company Qualcomm attempted to acquire Dutch semiconductor company NXP, but the Chinese antitrust authorities delayed the approval process, ultimately causing the $44 billion mega-deal to collapse. In 2019, U.S. semiconductor equipment maker Applied Materials tried to acquire Japan's Kokusai Electric, but the acquisition was canceled after China delayed approval.

As interest in M&A deals in the semiconductor industry rises recently, attention is also focused on the impact of the U.S.-China conflict on the market. It was recently reported that Western Digital (WD), the second-largest NAND flash company in the U.S., is pursuing a merger with Japan's Kioxia. SK Hynix is also awaiting China's approval for its acquisition of Intel's NAND business unit. China is conducting a competition review of U.S. AMD's acquisition of Xilinx as well.

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