China News Service, December 22. According to the website of the State Administration for Market Regulation, the State Administration for Market Regulation recently issued the "Announcement on the Anti-monopoly Review Decision on Approving Part of the Business Case of SK Hynix Co., Ltd. Acquisition of Intel Corporation with Additional Restrictive Conditions" (hereinafter referred to as the Announcement) ).
The announcement stated that the State Administration for Market Supervision had received an antitrust declaration for the concentration of undertakings in the case of SK Hynix Co., Ltd. (hereinafter referred to as SK Hynix) acquiring part of Intel's business (hereinafter referred to as the target business) (hereinafter referred to as the case).
After review, the State Administration for Market Regulation decided to add restrictive conditions to approve this concentration of undertakings.
According to Article 30 of the "Anti-Monopoly Law of the People's Republic of China" (hereinafter referred to as the "Anti-Monopoly Law"), the announcement is as follows:
Case filing and review procedures
According to the announcement, on December 15, 2020, the State Administration of Market Supervision received an anti-monopoly declaration for the concentration of undertakings in this case.
Upon review, the State Administration for Market Regulation found that the application materials were incomplete and required the applicant to supplement it.
On March 22, 2021, the State Administration for Market Regulation confirmed that the supplemented application materials complied with Article 23 of the Anti-Monopoly Law, and filed a case for this concentration of undertakings and started preliminary review.
On April 21, 2021, the State Administration of Market Supervision decided to further review this concentration of undertakings.
On July 20, 2021, with the consent of the notifying party, the State Administration for Market Regulation decided to extend the time limit for further review.
On September 15, 2021, before the expiration of the extended review period, the notifying party applied to withdraw the case and obtained the approval of the State Administration for Market Regulation.
On September 18, 2021, the State Administration for Market Regulation will file a case for review of the re-declaration by the declaring party.
Currently, the case is in the further review stage, and the deadline is January 15, 2022.
The State Administration for Market Regulation believes that this concentration has or may have the effect of eliminating or restricting competition on the global and Chinese PCIe enterprise-class solid-state drive market and the SATA enterprise-class solid-state drive market.
During the review process, the State Administration for Market Regulation solicited opinions from relevant government departments, industry associations, competitors in the industry and downstream customers to understand relevant market definitions, market participants, market structure, industry characteristics, etc., and submitted documents to the applicant , The authenticity, completeness and accuracy of the materials have been reviewed.
Basic situation of the case
Acquirer: SK Hynix was incorporated in South Korea in 1983 and was listed on the Korea Stock Exchange in 1996. Its equity is dispersed and has no ultimate controller. It is mainly engaged in memory, solid-state hard drives and image sensor related businesses.
Acquired party: The target business is part of Intel’s storage business, and the ultimate controller is Intel. It is mainly engaged in NAND flash memory and solid-state hard disk related businesses.
On October 19, 2020, the parties to the transaction signed the agreement.
After the concentration is completed, SK Hynix will independently control the target business.
Related market
In terms of related commodity markets, after review, SK Hynix and the target business have horizontal overlap in the PCIe enterprise-class solid-state drive market, SATA enterprise-class solid-state drive, customer-class solid-state drive, and NAND flash memory market.
At the same time, SK Hynix is also engaged in the upstream DRAM business and has a vertical relationship with downstream solid-state drives, while NAND flash memory and solid-state drives also have a vertical relationship.
1. Customer-grade solid state drives.
Solid-state hard drives are hard drives based on integrated circuit components, mainly composed of flash memory, controllers, and power management chips.
According to different terminal applications, solid-state drives can be divided into enterprise-level solid-state drives and customer-level solid-state drives.
Enterprise-level solid state drives have higher capacity density, faster data read and write speeds and lower risk of errors, and are mainly used in high-load applications such as data centers.
Customer-grade solid state drives are mainly used in low-load applications such as personal computers.
The performance of the two is different, and there is no substitute relationship between each other.
This case defines customer-grade solid state drives as an independent related commodity market.
2. Enterprise-level solid state drives.
According to different interfaces, enterprise-class solid-state drives are divided into PCIe enterprise-class solid-state drives, SAS enterprise-class solid-state drives, and SATA enterprise-class solid-state drives.
The read and write speeds of SSDs with different interfaces are different, and the performance in actual applications is quite different, and there is no substitute relationship between each other.
In this case, PCIe enterprise-class solid-state drives and SATA enterprise-class solid-state drives are defined as independent related commodity markets.
3. NAND flash memory.
Flash memory is a non-volatile memory that can retain stored data in the event of a power failure.
According to different design structures, flash memory is mainly divided into NAND flash memory and NOR flash memory.
The storage units in NAND flash memory are connected in series, which is suitable for low-cost, high-density, high-speed programming or erasing data storage applications, such as solid-state hard drives.
The storage units in NOR flash memory are connected in parallel, which is suitable for low-density, low-capacity, high-speed reading code storage applications, such as program storage for embedded systems.
There are differences in characteristics and uses between the two, and there is no substitute relationship between them.
This case defines NAND flash memory as an independent related commodity market.
4. DRAM.
RAM is a volatile memory, and data is lost when the power is turned off.
According to different data storage methods, RAM is mainly divided into SRAM and DRAM.
SRAM uses transistors to store data and is usually used in applications that require high speed.
DRAM mainly uses capacitors to store data, and is usually used in electronic products such as computer memory and graphics cards.
The prices and speed of the two are different, and there is no substitute relationship between them.
This case defines DRAM as an independent related commodity market.
In terms of relevant geographic markets, the relevant products involved in this case are all supplied and purchased globally, and suppliers are competing globally. There is no obvious price difference between products in different countries, and the proportion of product freight in the final selling price is relatively low. There are significant barriers to cross-border trade.
Therefore, the relevant geographic market for the above-mentioned commodities is defined as the world, and the situation in the domestic market in China is also examined.
competition analysis
The announcement pointed out that, in accordance with Article 27 of the Anti-Monopoly Law, the State Administration of Market Supervision shall determine the market share of the operators participating in the concentration in the relevant market and their control over the market, the market concentration of the relevant market, and the concentration on downstream users. The impact of enterprises and other relevant operators has been analyzed in depth on the impact of this concentration of operators on market competition, and it is believed that this concentration has or is possible for the global and Chinese PCIe enterprise-class solid-state drive market and the SATA enterprise-class solid-state drive market. It has the effect of eliminating and restricting competition.
(1) The transaction will increase the market concentration of SATA's enterprise-class solid-state hard drives and enhance the market control of the entity after the concentration.
In 2020, in the global SATA enterprise-class solid-state drive market, SK Hynix and its target business market share will total 30%-35%.
Before the transaction, the Herfindahl Index (hereinafter referred to as HHI) was 2544, indicating a high degree of market concentration.
After concentration, the HHI is 2851, with an increment of 307.
In the domestic SATA enterprise-class solid state drive market in China, the target business and SK Hynix’s market share totals 55%-60%.
Before the transaction, HHI was 4139, and the market was highly concentrated.
4329 after the transaction, an increase of 190.
The transaction will further increase market concentration and weaken market competition.
At the same time, the transaction will integrate the patents and unique technical know-how of both parties, eliminate SK hynix’s close competitors in the global and Chinese domestic markets, reduce the competition constraints it faces, and further improve the market control of the centralized entity.
(2) The transaction will increase the market concentration of PCIe enterprise-class solid-state drives and enhance the control of entities after the concentration.
In 2020, in the global PCIe enterprise-class solid-state drive market, the total market share of SK Hynix and the target business will be 40%-45%.
Before the transaction, HHI was 2775, and the market concentration was relatively high.
After the transaction 3456, the increment is 681.
In the PCIe enterprise solid state drive market in China, the target business and SK Hynix's market share totaled 50%-55%.
The transaction will further increase market concentration and weaken market competition.
At the same time, the transaction eliminates SK Hynix’s close competitors in the global and Chinese domestic markets, reduces the competition constraints it faces, and further enhances the entity's control in the Chinese domestic market after the concentration.
(3) Concentration may enhance the motivation and ability of relevant market competitors to coordinate prices.
After the completion of the transaction, the main competitors in the SATA enterprise solid state drive market will be reduced from 4 to 3, and the total global market share will exceed 90%; the main competitors in the PCIe enterprise solid state drive market will be reduced from 3 to 2, and the total global market share More than 80%.
The solid-state drive market has mature technology and relatively transparent prices, and customers mainly purchase through bidding.
With the reduction in the number of major competitors, the cost of communicating and coordinating between competitors through explicit or implicit means is reduced, and it is easier for operators to speculate on the pricing strategies of other competitors through the results of winning bids.
At the same time, the solid-state drive market has more room for profit from coordinated price behavior, and behaviors that deviate from coordination are more likely to be found and restrained. The motivation and ability to coordinate prices among competitors is further improved.
(4) The market entry barriers are high, and it is difficult for new effective competitors to emerge in the short term.
Enterprise-level solid state drives are mainly used in data center servers, and customers have extremely high requirements for product quality and stability.
New entrants often face obstacles such as funding and customer certification at the same time. In the short term, it is difficult for new competitors to emerge in the market to form effective competitive constraints on the centralized entities.
Negotiations with additional restrictive conditions
During the review process, the State Administration of Market Supervision informed the notifying party of the review opinions that this case has or may have the effect of eliminating or restricting competition, and discussed with the notifying party how to reduce the adverse effects of this concentration of undertakings on competition and other related issues. Round of negotiations.
In accordance with the Interim Provisions on the Review of Concentration of Undertakings, the State Administration of Market Supervision conducted an assessment of the effectiveness, feasibility, and timeliness of the restrictive conditions in accordance with the “Interim Regulations on the Review of Concentration of Undertakings” for the restrictive conditions submitted by the applicants.
After evaluation, the State Administration of Market Supervision believes that the additional restrictive conditional commitment plan submitted by the applicant on December 7, 2021 (see attachment) can reduce the adverse effects of this concentration of undertakings on competition.
Review decision
According to the announcement, in view of the fact that the concentration of operators in the PCIe enterprise solid state drive and SATA enterprise solid state drive market has or may have the effect of eliminating or restricting competition, the State Administration of Market Supervision has decided to add restrictions based on the additional restrictive condition commitment plan submitted by the applicant. To approve this concentration under sexual conditions, the entities after the concentration are required to perform the following obligations:
It is not allowed to supply PCIe enterprise-class solid-state drive products and SATA enterprise-class solid-state drive products to the Chinese domestic market at unreasonable prices.
The price of PCIe enterprise-level solid-state drive products and SATA enterprise-level solid-state drive products sold to the Chinese market shall not be higher than their average price within the 24 months prior to the effective date, provided that the transaction terms are similar.
Continue to expand the output of PCIe enterprise-class solid-state drive products and SATA enterprise-class solid-state drive products within 5 years from the effective date.
Continue to supply all products to the Chinese domestic market in accordance with the principles of fairness, reasonableness and non-discrimination.
It is not allowed to force or in a disguised form to force customers in the Chinese market to exclusively purchase products from SK hynix or any company controlled by SK hynix; it is not allowed to compulsorily match PCIe enterprise-class solid-state drives with other products, or SATA enterprise-class solid-state drives with other products. Sale or bundle sale.
Help a third-party competitor enter the PCIe enterprise solid state drive and SATA enterprise solid state drive market.
It is not allowed to reach any written or oral agreement, decision or other coordinated behavior (including implied collaboration) with its main competitors in China in terms of sales price, output or sales volume.
The announcement clarified that, in addition to the implementation of restrictive conditions for supervision and execution, SK hynix submitted to the State Administration of Market Supervision on December 7, 2021, the additional restrictive conditions undertaking plan has laws for SK hynix, target businesses and post-concentration entities. Binding.
After 5 years from the effective date of the restrictive conditions, the concentrated entity may apply to the State Administration for Market Regulation to remove the conditions.
The General Administration of Market Supervision will make a decision on whether or not to dissolve in accordance with the application and the market competition situation.
Without the approval of the General Administration of Market Supervision, the entity shall continue to fulfill the restrictive conditions after the concentration.
The announcement stated that the State Administration for Market Regulation has the right to supervise and inspect the performance of the above-mentioned obligations by entities after the concentration through supervision trustees or by themselves.
If the entity fails to perform or violate the above-mentioned obligations after the concentration, the State Administration of Market Supervision will deal with it in accordance with the relevant provisions of the Anti-Monopoly Law.