China Delaying Review of SK Hynix's Acquisition of Intel's NAND Unit

The M&A market in the global semiconductor industry is shrinking as more and more governments are regarding the industry as a key component of national security.

M&As in the global semiconductor industry are showing signs of regression. The potential shrinkage of the M&A market is because more and more governments are regarding the industry as a key part of national security. Samsung Electronics is aiming to sign a major M&A deal within three years, but its plan may be thwarted by this trend.

According to market research firm IC Insights, a total of 14 M&A announcements were made in the global semiconductor industry for the first eight months of this year, and the combined value of the deals is US$22 billion. For reference, the value was US$24.7 billion in January to August 2019 and US$23.4 billion in January to August 2020.

It is pointed out that the rapid growth of the M&A market that has continued since the second half of last year is about to end. In the market, a lot of M&A announcements were made in the second half of last year and early this year, when a global chip shortage intensified investment and technological competition in the industry.

“The contracts signed in the market in that period add up to US$15.8 billion and the value of those signed in the first quarter of this year is the highest Q1 value ever,” the firm explained, adding, “However, the number of such announcements has decreased since April this year.”

This is because of increasing trade protectionism. The United States and China are continuing with their hegemonic competition and the semiconductor industry is increasingly linked to national security.

Major economies are putting the brakes on M&A deals for national security reasons. For instance, Applied Materials announced in July 2019 to acquire Kokusai Electric for US$2.2 billion and the deal failed in March this year after the Chinese government delayed its examination.

These days, the trend is being led by the United States, the United Kingdom and the European Union as well as China. The U.K. government and the European Union disallowed Nvidia’s acquisition of Arm. The former said that an in-depth investigation would be initiated regarding national security, and the latter stated that the acquisition would lead to monopoly.

South Korean companies cannot but be affected by the trend. Samsung Electronics is pursuing large-scale M&As, but it is likely to get tougher and tougher. “Even if Samsung Electronics reaches an agreement with a target company, they are likely to be hampered by governments and competitors,” said an industry source.

SK Hynix, which is in the process of acquiring Intel’s NAND business, is being affected, too. The antitrust reviews in Singapore, South Korea, the United States, Taiwan, Brazil, the United Kingdom and the European Union have been completed since July this year, but the process in China has already been delayed for about a year.

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