February 10, 2021 | Technology | Global | Ended

What to Expect from China's SAMR / Dialog, Inphi, Maxim, Siltronic, and Xilinx: In-Depth Report

State-of-the-art computer chips underpin many of today’s strategically important emerging technologies and are vital to the balance of global military power, owing to their use in telecom networks, high-performance computing, Internet of Things (IoT), artificial intelligence (AI) and next-generation weapons platforms. Gaining the technology upper hand requires control over their production, and both China and the US profoundly recognise that semiconductor technology and fabrication is critical to reaching their respective goals of global economic and military superiority. Unfortunately for China, although the semiconductor supply chain is global, its foundation is based largely on US technology, and the world’s leading chipmakers, from Qualcomm to Samsung to TSMC, all rely on the tools and intellectual property of only a handful of mostly American companies. This dependence on foreign technology has created challenges for China, exemplified by the Trump administration’s attempts to cut Huawei’s access to key technologies, subsequently putting the Chinese company into survival mode while hampering Beijing’s strategic ambitions in 5G. For Washington, implementing export controls and placing restrictions on Chinese companies is necessary to protect US economic competitiveness and national security. But this approach comes with risks, including reciprocal actions by China against US businesses. Armed with the ability to block or significantly delay a transaction, China’s State Administration for Market Regulation (SAMR) arguably offers an effective retaliatory tool against US trade aggressions. In this report, we assess this risk against five pending large cap semiconductor deals – Dialog, Inphi, Maxim, Siltronic, and Xilinx. We speak with experts to explain the reasons behind SAMR delays and assess precedents to determine the extent of political influence on China's merger control outcomes. Based on China’s key semiconductor priorities, we identify which deals are the ‘riskiest’ and most prone to a lengthy review at SAMR.

Contents 1. Global Semiconductor Industry Primer 2. China’s Semiconductor Strategy and Priorities 3. Geopolitical Sensitivities in Semiconductors 4. How SAMR Can Delay or Halt Semiconductor M&A 5. Precedent Semiconductor Deals: Scope for Remedies and Trading 6. Dialog, Inphi, Maxim, Siltronic, Xilinx: Red Flags and Trading Appendices A. Competition by Semiconductor Value Chain Input B. Precedent Semiconductor M&A Trading Statistics (66 pages)

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