China is taking over an increasing number of companies in developed countries in the fields including the Internet of Things (IoT), robotics and biotechnology, which South Korea is focusing on as its future growth engines.
China recorded the largest number of M&A deals in its history last year but the number for the first five months of this year has already exceeded it. In addition, China’s ICT firm acquisition amount recently surpassed that of the United States for the first time ever. Chinese enterprises’ strategy to enhance their technological competitive edge by means of M&A is predicted to lead to more and more patent disputes against their South Korean counterparts.
According to financial data provider Dealogic, Chinese enterprises signed international M&A deals worth a total of US$110.8 billion between January and May this year, which exceeds last year’s total of US$106.8 billion. In the ICT sector alone, the amount reached US$65.7 billion for the first four months of this year while the purchase by American companies, which ranked first in the world for more than a decade, totaled US$45.6 billion during the same period.
According to a Boston Consulting Group report, the main purpose of Chinese companies’ M&A had been local market penetration (56%) in 2006. Last year, however, it was the procurement of technology, products and intellectual property rights (32%). This means China is taking the shortcut of M&A in order to get the three key resources of market dominance, reliable manpower and patents.
Economists point out that the Chinese government is encouraging M&A-based patent obtainment in an effort to boost the growth of 10 new industries until 2025 in relation to the Fourth Industrial Revolution. Many of the 10 sectors are the same as many of the 19 sectors the South Korean government is concentrating on, which implies a higher level of exposure to patent attacks from China.