Actionable insights straight to your inbox

logo_equities.svg

Magnachip Acquisition by Chinese Private Equity Firm Is National Security Risk: US Treasury Dept

Wise Road Capital agreed to buy Magnachip in March in a $1.4 billion deal.
The Associated Press is an independent, not-for-profit news cooperative headquartered in New York City. Our teams in over 100 countries tell the world’s stories, from breaking news to investigative reporting. We provide content and services to help engage audiences worldwide, working with companies of all types, from broadcasters to brands.
The Associated Press is an independent, not-for-profit news cooperative headquartered in New York City. Our teams in over 100 countries tell the world’s stories, from breaking news to investigative reporting. We provide content and services to help engage audiences worldwide, working with companies of all types, from broadcasters to brands.

Image source: Magnachip Semiconductor

The U.S. 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 $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 U.S. 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 U.S. Department of Treasury, had ordered the deal to be put on hold in June.

The filing to the U.S. 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, fueling calls for the United States to rely less on China and leading to efforts such as the U.S. Senate passing the "U.S. Innovation and Competition Act" which authorized about $190 billion for provisions to strengthen U.S. technology and research. read more

Reporting by Joyce Lee; Editing by Jacqueline Wong.

_____

Source: Reuters

The implications of the dollar potentially losing its status as the global reserve are numerous. Obviously, there may be currency risks, and decreased demand for U.S. Treasuries could lead to rising interest rates. I would also expect to see massive commodity price swings.
Many of us economy-watchers have been expecting recession, though with significant differences on odds and timing. Regardless, recent banking developments just made recession more likely and may have accelerated its onset.
Many people think of position size in terms of how many shares they own of a particular stock. But it’s much smarter to think of it in terms of what percentage of your total capital is in a particular stock.