Proposed Acquisition By SK Holdings Co. Ltd. Of LG Siltron

Notifying Parties:

SK Holdings Co. Ltd.

Notifying Date:

8 March 2017

Summary of transaction:

(i)           The names of the merger parties;

• SK Holdings Co. Ltd. (“SK Holdings”) as purchaser

• LG Corporation (“LG Corporation”) as seller

• LG Siltron Inc. (“LG Siltron”) as target 

(ii)         A description of the transaction; 

This sole notification by SK Holdings relates to the anticipated acquisition by SK Holdings of 51% shares in LG Siltron from LG Corporation (“Proposed Transaction”).  

(iii)        A description of the business activities of the merger parties worldwide and in Singapore; 

• LG Siltron is in the business of manufacturing and selling silicon wafers for the semiconductor industry worldwide. LG Siltron has no offices or facilities in Singapore, and does not undertake manufacturing or research and development in Singapore, but supplies silicon wafers to customers in Singapore.   
   

• SK Holdings is the holding company of SK group’s various affiliated companies that are engaged in diversified businesses, including energy, chemicals, information and communications, semiconductors, marketing and services. The principal business activities of SK Holdings itself are only in investment holding, IT service, security service and used-car distribution. 

SK Hynix Inc. (“SK Hynix”) is a member of the SK group and SK Hynix is in the business of manufacturing and selling of semiconductors, its key products being DRAMs (Dynamic Random Access Memory) and NAND flash memory. Specifically in Singapore, SK Hynix conducts marketing and sales activities and supports multinational enterprise customers in Southeast and Southwest Asia.  

SK Holdings holds 25.22% in SK Telecom Co., Ltd. (“SK Telecom”), which in turn holds 20.07% in SK Hynix. Each of SK Hynix, SK Telecom and SK Holdings are public companies listed on the Korea Stock Exchange, governed by their respective board of directors independently making their respective corporate decisions.  

• LG Corporation will not, as a result of its divestment of interests in LG Siltron, have any remaining business interest in the silicon wafer industry or the semiconductor memory industry upon completion of the Proposed Transaction, but will continue to have business interests in electronics, chemicals and telecom products.  

(iv)        A description of the overlapping goods or services, including brand names; 

SK Holdings submits that there are no overlapping goods or services sold by LG Siltron and SK Holdings (or SK Hynix (if applicable)) worldwide including in Singapore. 

(v)          A description of substitute goods or services; 

Not applicable. 

(vi)        The applicant’s views on:

(a)        definition of the relevant market(s);

(b)        the way in which competition functions in this market;

(c)        barriers to entry and countervailing buyer power; and

(d)        the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).

Relevant Markets

SK Holdings submits that there are no overlapping goods or services by LG Siltron and SK Holdings (including SK Hynix) (“Relevant Parties”). Within the Relevant Parties’ respective products, the relevant product markets may be broadly defined, for the purposes of this notification, as follows: (i) silicon wafer; (ii) DRAM (if SK Hynix is deemed relevant to the notification,); and (iii) NAND flash (if SK Hynix is deemed relevant to the notification) (“Relevant Markets”). SK Holdings has submitted that SK Hynix is not relevant to the notification.

Competition

SK Holdings submits that LG Siltron (and SK Hynix (if applicable)) face intense competition within the silicon wafer market (and the semiconductor memory market (if applicable)) where market players compete aggressively to improve yields and invest in technology as well as capitalise on growth opportunities. Competitors with greater financial, technical, engineering and manufacturing resources will have relative competitive advantage.

Barriers to Entry

SK Holdings submits that new entrants to the Relevant Markets will be faced with high initial set-up and capital costs but other than that, there are no significant regulatory barriers that make entry into the Relevant Markets difficult. As such, while barriers to entry exist, SK Holdings is of the view that they are not insurmountable.

Countervailing Buyer Power

SK Holdings submits that the demand-side of the Relevant Markets is characterised by large sophisticated buyers with sufficient countervailing bargaining power to negotiate purchases, being able to switch suppliers relatively easily.

Non-coordinated effects

SK Holdings submits that the Proposed Transaction will not give rise to horizontal effects, as the Relevant Parties produce very different types of equipment and do not have any horizontally overlapping activities.

There are also no potential vertical effects arising from the Proposed Transaction (if SK Hynix is deemed relevant to the notification, which the applicant submits is not) in view of, amongst others:

(a)        the merged entity has no ability to substantially restrict or hamper access to silicon wafers;

(b)        the merged entity has no incentive to substantially restrict or hamper access to silicon wafers;

(c)        in any event, a foreclosure strategy of silicon wafers by the merged entity would not have a significant detrimental effect on downstream competition; and

(d)        there is no loss of pricing confidentiality.

Coordinated effects

SK Holdings submits that the Proposed Transaction will not give rise to coordinated effects in the Relevant Markets  even if SK Hynix is deemed relevant to the notification in view of, amongst others:

(a)        the constant and rapid changes in technology not being conducive to coordination;

(b)        the demand drivers and cost structure of the Relevant Markets not being conductive to coordination;

(c)        the Proposed Transaction not leading to foreclosure and accordingly not increasing the ease of coordination (if any); and

(d)        the Proposed Transaction not giving rise to deterrent mechanisms to adhere to any terms of coordination.

Decision:

The proposed merger, if carried into effect, will not infringe the Section 54 prohibition.

Decision Date:

12 May 2017.

Read Media Release.

Read the Grounds of Decision.