China’s state-run Global Times newspaper lashed out at the US for trying to block a Chinese company’s $1.4 billion purchase of a South Korean chipmaker, calling it a ”red flag” that impedes the development of Chinese tech companies and disrupts growth in the global tech sector.
An interim order by the US Treasury Department’s Committee on Foreign Investment in the United States (CFIUS) in June to block China’s private equity firm Wise Road Capital from buying South Korean chip manufacturer Magnachip Semiconductor ”represents a dangerous precedent for the industry as a whole,” the newspaper said in an op-ed commentary.
The US Department of Treasury wrote in a letter to Magnachip’s legal counsel on Friday that the acquisition posed “risks to the national security of the United States,” the company said in an SEC filing on Monday.
“If the US succeeds in blocking the deal this time, it could set a very bad precedent for global high-tech mergers and acquisitions, further consolidating the industrial concentration in the US,” the newspaper, published by China’s flagship People’s Daily, said in an op-ed. It added that Magnachip – whose operations, R&D, production and sales are mostly in South Korea – holds a market share that is “far below the threshold that requires its acquisition to be subject to review by regulators in other countries.”
US intervention gives the South Korean government a “tricky choice on the matter” because of the escalating strategic rivalry between China and the US, while Korean companies suffered “unnecessary foreign interference” for normal business practices, the newspaper said. It claimed the CFIUS review of the Magnachip deal “could set a very bad precedent for global high-tech mergers and acquisitions”, and that the US ”wants to take a monopolistic role in the global chipmaking sector.”
“If all tech-related acquisitions face the risk of US regulatory scrutiny in the future, it would give US technology companies a distinct advantage in terms of M&As at the expense of the chip industry of all other countries,” the newspaper said.
The chip sector has become a hotbed for tensions between the US and China. Both countries are pouring billions into their domestic industries, with the recognition that semiconductors are critical to national security and economic development.
Cross-border acquisitions, which require approval from regulatory bodies, have at times fallen apart because of government objections. In 2018, Qualcomm Inc’s planned $44 billion acquisition of Dutch chipmaker NXP Semiconductors NV failed after China’s anti-monopoly regulator signaled it would not approve the deal.
In the same year, Singapore’s Broadcom Inc withdrew its $117-billion bid to acquire Qualcomm after CFIUS said the purchase could endanger the US’ national security by aiding China. There have also been reports that the European Union and some of the world’s biggest multinationals are concerned about US company Nvidia’s $54-billion bid for British chip designer Arm.
• By Jim Pollard and Reuters