US-China tech war: Washington blocks Chinese fund’s US$1.4 billion takeover of South Korean chip maker
- The move by CFIUS is a further blow to China’s efforts to acquire semiconductor technologies and production capabilities
- Wise Road Capital has emerged as an active Chinese buyout fund in the chip sector, raising eyebrows as it snapped up assets around the world
The US agency responsible for screening foreign investment deals has blocked a Chinese fund’s US$1.4 billion takeover of a South Korean chip maker, as Washington continues to exert its influence to restrict China’s access to semiconductor technologies.
Chinese buyout fund Wise Road Capital has withdrawn its bid for Magnachip after the deal failed to receive approval from the Committee on Foreign Investment in the United States (CFIUS), according to a statement from the Seoul-based company on Monday.
The termination of the deal comes as the semiconductor industry takes centre stage in technology rivalry between China and the US. Separately, Washington barred US investment in Chinese artificial intelligence start-up SenseTime before its Hong Kong IPO this week.
The move by CFIUS is a further blow to China’s efforts to acquire semiconductor technologies and production capabilities. While its production facilities and major markets are in Asia, Magnachip is listed on the New York Stock Exchange, giving the regulator a legal basis to intervene.
The deal came under the spotlight after Wise Road Capital announced its intention to buy the South Korean chip firm in March, and was put on hold after CFIUS stepped in for scrutiny in June.
“We are disappointed by the termination of our merger agreement,” said Y.J. Kim, Magnachip’s chief executive officer, adding that despite months of efforts, they failed to gain US approval for the merger.
South Dearborn, the investment vehicle for Wise Road, will pay Magnachip a termination fee of US$70.2 million, of which US$51 million will be paid immediately and the rest deferred until March 31 next year, the statement said.
Since its incorporation in 2016, Wise Road Capital has emerged as an active Chinese buyout fund in the semiconductor sector, raising eyebrows as it snapped up semiconductor assets around the world.
In 2017, it teamed up with JAC Capital to acquire NXP Semiconductors’ standard products business for US$2.75 billion, renaming the unit Nexperia. It cashed out last year by selling the unit to Wingtech Technology, a rising Chinese semiconductor company.
