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US Says China Private Equity’s Magnachip Purchase Is Security Risk

Magnachip said in a SEC filing on Monday the Treasury Department sent a letter last Friday to say the Chinese takeover bid posed “risks to the national security”


The US Treasury building is seen in Washington in this 2008 photo by Jim Bourg, Reuters.

 

The US Treasury Department said the acquisition of Magnachip Semiconductor Corp by a Chinese private equity firm posed “risks to national security”, in another hurdle for Chinese companies trying to invest abroad in critical tech industries.

In March, Chinese private equity firm Wise Road Capital agreed to acquire system chip manufacturer Magnachip in a deal valued at $1.4 billion.

Since then, regulatory authorities in countries including the United States and South Korea have been reviewing the deal. Magnachip, which produces display and power chips, has production and R&D facilities based in South Korea.

Magnachip said in a SEC filing on Monday the US Department of Treasury, in a letter to the company’s legal counsel last Friday, said the acquisition posed “risks to the national security of the United States,” and expects to seek President Joe Biden’s decision on the matter.

CFIUS, a committee under the US Department of Treasury, had ordered the deal to be put on hold in June.

The filing to the US Securities and Exchange Commission did not specify the nature of the risks.

Magnachip was assessing its next steps, but cannot give assurance that it would agree to proposals that would facilitate clearance by CFIUS, the filing said. A spokesperson for Magnachip declined further comment.

A global shortage of chips has slowed production in the automobile and tech industries, fuelling calls for the United States to rely less on China and leading to efforts such as the US Senate passing the “US Innovation and Competition Act” which authorised about $190 billion for provisions to strengthen US technology and research.

 

• Reuters and Jim Pollard

 

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This story was updated with a new headline.

Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.

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