Chinese Purchase of Korean Semiconductor Company Rejected in CFIUS Review

In mid-September, we wrote about a CFIUS review of a proposed purchase of a South Korean semiconductor company by a Chinese equity fund. The purchase has now been cancelled, as it could not obtain approval from CFIUS.

In March of this year, the South Korean company Magnachip announced its sale for $1.4 billion to Chinese equity fund Wise Road. But a CFIUS review (and an associated Korean government review) on the basis of national security concerns threatened to block the transaction.

In a press release issued on December 13, Magnachip announced that the purchase would not go forward. It said that it and Wise Road "received permission from" CFIUS "to withdraw their joint CFIUS filing in relation to their proposed transaction ...  and will be terminating their previously announced definitive merger agreement." This course of action, it said, "resulted from the inability of the parties, despite months of effort, to obtain CFIUS's approval for the Merger."

It said that the application concerning the merger that had been submitted to the Korean Ministry of Trade, Industry and Energy under Article 11-2 of the Act on Prevention of Divulgence and Protection of Industrial Technology would also be withdrawn.

As we suggested in our September piece, the CFIUS decision here "reflects an assertive and aggressive approach by the Biden administration to national security reviews for Chinese purchases of foreign technology companies," and "shows how broadly the administration envisions its jurisdictional authority." It also makes clear how important semiconductors are, as even a company with products that may have minimal security implications was deemed important enough to raise concerns. All of this suggests a tough approach to security reviews of tech mergers and acquisitions, even if they have little connection to the United States, going forward.