US May Block Chinese Private Equity Firm's Acquisition of MagnaChip

[Asia Economy Reporter Cho Hyun-ui] As a Chinese private equity fund attempts to acquire the mid-sized domestic system semiconductor company MagnaChip Semiconductor, there are prospects that the U.S. government may intervene.

According to the state-run media Global Times on the 31st, MagnaChip Semiconductor recently stated, "We received an email from the U.S. Treasury Department on behalf of the Committee on Foreign Investment in the United States (CFIUS)," adding, "We were required to submit acquisition-related guidance documents and undergo an official review by CFIUS."

MagnaChip Semiconductor specializes in organic light-emitting diode (OLED) display driver integrated circuits (DDIC) and automotive power semiconductors, holding several related patents.

After spinning off from SK Hynix (then Hynix Semiconductor) in October 2004, it was acquired by Citigroup Venture Capital and listed on the New York Stock Exchange.

Earlier this year, MagnaChip Semiconductor decided to sell all shares of its U.S. headquarters to the Chinese private equity fund 'Wise Road Capital' and related limited partners, and the sale process is underway. The sale is reported to be approximately $1.4 billion (about 1.5828 trillion KRW).

Concerns have been raised about the potential leakage of semiconductor technology to China through this acquisition.

MagnaChip Semiconductor stated regarding CFIUS's request, "We believe no approval is necessary for the acquisition in the U.S., but we will cooperate."

Chinese experts suggest that CFIUS may block this acquisition, arguing that "the greatest fear of the U.S. is China's technological rise."

Information technology (IT) expert Xiang Ligang views the possibility of U.S. intervention as high, saying, "CFIUS may cite ambiguous reasons such as monopoly power or national security, or simply delay approval for an extended period."

He added, "The U.S. will fear a situation where China secures semiconductor production capabilities using resources and technology from overseas acquisition targets, eliminating the need to purchase American products."

Another expert, Pu Liang, said, "There is also a possibility that CFIUS will approve the acquisition with specific conditions, such as ensuring that the acquisition does not harm the interests of U.S. companies or that MagnaChip Semiconductor operates independently after the merger."