'MagnaChip China Sale' to be Concluded by End of This Month... Government Unlikely to Intervene

Ministry of Industry to Determine MagnaChip's Possession of National Core Technology by the End of This Month

[Sejong=Asia Economy Reporter Kwon Haeyoung] The government will decide by the end of this month at the earliest whether MagnaChip Semiconductor possesses national core technology. If it is determined that the company does not hold core technology, the sale to the Chinese private equity fund will proceed automatically. Inside and outside the government, there is a forecast that the conclusion will be that MagnaChip does not possess national core technology.

According to the industry on the 17th, the Ministry of Trade, Industry and Energy plans to decide within this month whether the technology of display driver integrated circuits (DDI), MagnaChip's main product, qualifies as national core technology.

DDI is a semiconductor that operates organic light-emitting diode (OLED) panels installed in TVs and smartphones. It is different from mobile application processors (AP), modems, memory semiconductors, etc., which the government has designated as national core technologies.

Earlier, in March, MagnaChip signed a contract to sell all its treasury shares to Wise Road Capital, a Chinese private equity fund, for $1.4 billion. Companies possessing national core technology must obtain government approval when promoting foreign investment such as overseas mergers and acquisitions (M&A). Accordingly, the Ministry of Trade, Industry and Energy is currently reviewing whether MagnaChip holds national core technology with the Industrial Technology Protection Committee composed of experts.

An industry official explained, "If the technology held by MagnaChip does not correspond to national core technology, the sale will proceed without any issues. If it is judged that MagnaChip holds national core technology, MagnaChip will apply for M&A approval, and the Ministry of Trade, Industry and Energy will decide on the approval after deliberation by the Industrial Technology Protection Committee."

There is also an opinion that even if the Ministry of Trade, Industry and Energy determines that MagnaChip possesses national core technology, the sale will proceed smoothly. An industry official said, "LG Group gave up on acquiring MagnaChip because they judged that it did not possess advanced technology," adding, "Unless the company has unique technology, it should be allowed to open a path for survival through overseas sales." The ministry also approved the sale of Samsung Display's Suzhou LCD factory in China in February.

Another industry official said, "MagnaChip's technology is something China does not have, so if it is transferred to Chinese companies in the future, global market competition could cause damage to our companies," but added, "However, since MagnaChip is currently being sold to Chinese capital and not transferred to a Chinese company, there is also a limit to the government’s ability to intervene preemptively."

Some argue that the government needs to reexamine the entire national core technology management system. This is because China's attempts to extract technology and personnel have become blatant, increasing the need for technology security. The Ministry of Trade, Industry and Energy has decided to include OLED DDI technology as national core technology during this review process of MagnaChip's technology and is currently working on related tasks.