US Treasury says China private equity's Magnachip purchase poses security risks

[SEOUL] The US Treasury Department said the acquisition of Magnachip Semiconductor Corp by a Chinese private equity firm posed "risks to national security", in another hurdle for Chinese companies trying to invest abroad in critical tech industries.

In March, Chinese private equity firm Wise Road Capital agreed to acquire system chip manufacturer Magnachip in a deal valued at US$1.4 billion.

Since then, regulatory authorities in countries including the United States and South Korea have been reviewing the deal.

Magnachip, which produces display and power chips, has production and R&D facilities based in South Korea.

Magnachip said in a SEC filing on Monday the US Department of Treasury, in a letter to the company's legal counsel last Friday, said the acquisition posed "risks to the national security of the United States," and expects to seek President Joe Biden's decision on the matter.

CFIUS, a committee under the US Department of Treasury, had ordered the deal to be put on hold in June.

The filing to the US Securities and Exchange Commission did not specify the nature of the risks.

Magnachip was assessing its next steps, but cannot give assurance that it would agree to proposals that would facilitate clearance by CFIUS, the filing said. A spokesperson for Magnachip declined further comment.

A global shortage of chips has slowed production in the automobile and tech industries, fuelling calls for the United States to rely less on China and leading to efforts such as the US Senate passing the "US Innovation and Competition Act" which authorised about US$190 billion for provisions to strengthen US technology and research.

REUTERS