ALD is a too powerful technology for The Merger
The Fair Trade Commission in Korea (FTC) said Monday
that it will conditionally approve the proposed merger between Tokyo
Electron and Applied Materials next month.
"The FTC reached a
consensus to approve the Tokyo Electron-Applied Materials deal in Korea,
next month, as previous rounds of talks resulted in limiting
competition in certain business areas that the merged entity had huge
bargaining power in," said an FTC official.
The official said the
FTC is discussing with regulators in six countries including the United
States and Japan to fix terms of details before agreeing the deal.
The
Korean regulator recently held a secret meeting with top executives of
local semiconductor parts suppliers to brief them on its decision for a
conditional approval.
"Samsung Electronics and SK hynix
submitted their views to the regulator over the possible impact on the
local semiconductor industry after the deal approves. The merged unit
guaranteed not to hurt fair competition," said another official.
Samsung Electronics and SK hynix declined to comment.
The
two semiconductor majors as well as local parts suppliers initially
objected to the Tokyo Electron-Applied Materials deal as Applied has
already secured more than a 20 percent share in the Korean semiconductor
equipment market.
These companies have expressed concerns about bundling and pricing power post-merger.
The
Korea Semiconductor Industry Association (KSIA) has hired Bae, Kim and
Lee (BKL) to represent domestic semiconductor players in arguing for
concessions.
Applied Materials has retained Kim & Chang, the top foreign-to-foreign merger lawyer to negotiate with the FTC.
"The
remedy has included a plan by the merged unit not to launch combined
chemical vapor deposition (CVD) and atomic layer deposition (ALD)
businesses in Korea. The merged unit plans to establish new entities for
fair competition, if necessary," said the official.
Data from
Gartner, a research firm, said Applied Materials was the global top
semiconductor equipment supplier with 16.2 percent share by last year,
followed by Tokyo Electron with 9.1 percent. That means that the
combined share of the two will go over 25.3 percent.
"In
principle, the FTC determines whether a proposed transaction
substantially restricts competition in a particular market by
considering multiple factors such as the market concentration before and
after the business combination, possibility of joint conduct among
competitors, possibility of new entrants, existence of similar goods and
adjacent markets, increase in the entry barrier and foreclosure of
competitors," said Gerald Foo, an analyst at Market Securities in
London.
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