Can't be supplied at an unreasonable price! The State Administration for Market Regulation approved the acquisition of SK Hynix with additional conditions

On December 22, the Anti-Monopoly Bureau of the State Administration for Market Regulation issued a news release saying that it had received an anti-monopoly declaration for the acquisition of part of Intel's business (hereinafter referred to as the target business) by SK Hynix Co., Ltd. (hereinafter referred to as the target business) (hereinafter referred to as the case). After review, the State Administration for Market Regulation decided to attach restrictive conditions to approve the concentration of undertakings.

In October 2020, SK Hynix announced a $9 billion acquisition of Intel's NAND solid-state drive business, Nand flash and wafer business, and Intel's NAND flash manufacturing facility in Dalian, while Intel retained only the Optane business.

The State Administration for Market Regulation said that on December 15, 2020, it received the anti-monopoly declaration of the concentration of undertakings in this case, and because the declaration materials were incomplete, the declaring party was required to supplement it. On September 18, 2021, the State Administration for Market Regulation filed and reviewed the re-declaration of the declaring party. The above-mentioned acquisition is currently under further review, with a deadline of January 15, 2022.

The State Administration for Market Regulation believes that this concentration has or may have the effect of eliminating or restricting competition in the global and Chinese PCIe enterprise SSD market and the SATA enterprise SSD market.

Upon review, SK Hynix and target businesses overlap horizontally in the PCIe enterprise SSD market, SATA enterprise SSD, customer SSD and NAND flash memory market. At the same time, SK Hynix is also engaged in the upstream DRAM business, and there is a vertical relationship with the downstream SSD, while the NAND flash memory also has a vertical relationship with the SSD.

The State Administration for Market Regulation believes that this transaction will increase the concentration of SATA's enterprise-level SSD market and enhance the market control of the centralized entity. In addition, the transaction will increase the concentration of the PCIe enterprise SSD market and enhance the control of the centralized entity. At the same time, concentration may enhance the motivation and ability of relevant market competitors to coordinate prices, and the barriers to market entry are high, and it is difficult to emerge new effective competitors in the short term.

"After the completion of the transaction, the main competitors in the SATA enterprise SSD market were reduced from 4 to 3, with a total global market share of more than 90% ;P the main competitors in the CIe enterprise SSD market were reduced from 3 to 2, and the total global market share exceeded 80%. The SSD market is technologically mature, the price is relatively transparent, and customers mainly purchase through bidding. In the case of a reduction in the number of major competitors, the cost of communication and coordination 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 winning bid results. At the same time, the profit margin of coordinated price behavior in the SSD market is larger, the behavior that deviates from coordination is easier to find and constrained, and the motivation and ability to coordinate prices among competitors are further improved. ”

According to the commitment plan of additional restrictive conditions submitted by the reporting party, the State Administration for Market Regulation decided to approve the concentration with additional restrictive conditions, requiring the entity after the concentration to perform the following obligations:

First, PCIe enterprise SSD products and SATA enterprise SSD products shall not be supplied to the domestic market in China at unreasonable prices. The price of PCIe enterprise SSD products and SATA enterprise SSD products sold to the domestic market in China shall not be higher than their average price in the 24 months prior to the effective date, provided that the terms of the transaction are comparable.

Second, we will continue to expand the production of PCIe enterprise SSD products and SATA enterprise SSD products within 5 years from the effective date.

Third, we will continue to supply all products to the Chinese domestic market on the basis of the principles of fairness, reasonableness and non-discrimination.

Fourth, customers in the domestic market in China shall not be forced or covertly forced to purchase products exclusively from SK Hynix or any company controlled by SK Hynix; PCIe enterprise SSD products and other products, SATA enterprise SSD products and other products shall not be forced to tie or bundle sales.

Fifth, help a third-party competitor enter the PCIe enterprise SSD and SATA enterprise SSD markets.

Sixth, it is not allowed to enter into any written or oral agreement, decision or other coordinated act (including implied synergy) with its main competitors in China in terms of sales price, volume or volume of sales to eliminate or restrict competition.

In the industry's view, after SK Hynix obtains Intel production capacity, SK Hynix will become the second largest flash memory giant after Samsung, and the world's six original factories will be reduced to five in the future.

"For SK Hynix, in addition to rapidly increasing production capacity, the acquisition can also effectively enhance its NAND Flash technology strength, and the layout of overseas factories can also reasonably circumvent Japan's raw material export restrictions for SK Hynix." Jibang Consulting analysts told reporters in a previous interview that after SK Hynix obtains Intel's 3D NAND Flash production capacity, its competitiveness in the field of enterprise SSD will jump sharply, and what needs attention to follow-up is how to balance between the different product architectures of Intel and SK Hynix to achieve maximum benefits.