The General Administration of Market Supervision received a concentrated antitrust declaration for the acquisition of part of Intel's business by SK Hynix Co., Ltd. After examination, the General Administration of Market Supervision decided to attach restrictive conditions to approve this concentration of operators.
The original text of the announcement is as follows:
The General Administration of Market Supervision received the anti-monopoly declaration of operator concentration in the case of SK Hynix Co., Ltd. (hereinafter referred to as SK Hynix)'s acquisition of part of Intel's business (hereinafter referred to as target business) (hereinafter referred to as this case). After examination, the General Administration of Market Supervision decided to attach restrictive conditions to approve this concentration of operators. In accordance with Article 30 of the Anti-monopoly Law of the people's Republic of China (hereinafter referred to as the Anti-monopoly Law), it is hereby announced as follows:
I. filing and examination procedures
On December 15, 2020, the General Administration of Market Supervision received an anti-monopoly declaration on the concentration of operators in this case. After examination, the General Administration of Market Supervision considers that the declaration material is incomplete and requires the declarant to supplement it. On March 22, 2021, the General Administration of Market Supervision confirmed that the supplementary declaration materials were in line with Article 23 of the Anti-monopoly Law, filed a case for this concentration of operators and began a preliminary review. On April 21, 2021, the General Administration of Market Supervision decided to conduct a further review of this concentration of operators. On July 20, 2021, with the consent of the declaring party, the General Administration of Market Supervision decided to extend the period for further review. On September 15, 2021, before the expiration of the extension period of further examination, the applicant applied to withdraw the case and obtained the consent of the General Administration of Market Supervision. On September 18, 2021, the General Administration of Market Supervision filed a case for examination of the filer's re-declaration. The case is currently under further review and the deadline is January 15, 2022. The General Administration of Market Supervision believes that this concentration has or may have the effect of excluding and restricting competition in the global and Chinese PCIe enterprise solid state disk market and SATA enterprise solid state disk market. In the course of the review, the General Administration of Market Supervision consulted relevant government departments, industry associations, competitors and downstream customers to understand the relevant market definition, market participants, market structure, industry characteristics and other information, and examined the authenticity, completeness and accuracy of the documents and materials submitted by the declarant.
II. Basic information of the case
The acquirer: SK Hynix was registered in Korea in 1983 and listed on the Korea Stock Exchange in 1996, with dispersed shares and no final controller, mainly engaged in memory, solid-state disk and image sensor related business.
Acquiree: the target business is part of Intel's storage business, and the final control is Intel, which is mainly engaged in NAND flash memory and solid-state disk related business.
On October 19, 2020, the parties to the transaction signed an agreement. After centralization, SK Hynix alone controls the target business.
III. Related markets
(1) relevant commodity markets.
Upon examination, SK Hynix and the target business have horizontal overlap in the PCIe enterprise solid state drive market, SATA enterprise solid state disk market, customer class solid state drive market 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 solid state disk, while there is also a vertical relationship between NAND flash memory and solid state disk.
1. Customer-grade solid state drives. Solid state disk (SSD) is a hard disk based on integrated circuit components, which is mainly composed of flash memory, controller and power management chip. According to different terminal applications, SSDs can be divided into enterprise SSDs and customer SSDs. Enterprise SSDs have higher capacity density, faster data read and write speed and lower error risk, 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 a lack of substitution relationship between them. In this case, customer-grade SSDs are defined as independent related commodity markets.
two。 Enterprise solid state drives. According to different interfaces, enterprise SSDs are divided into PCIe enterprise SSDs, SAS enterprise SSDs and SATA enterprise SSDs. The read and write speeds of solid state drives with different interfaces are different, and their performance is quite different in practical applications, and there is a lack of substitution relationship between them. In this case, PCIe enterprise solid state disk and SATA enterprise solid state disk 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 outage. According to the different design structure, flash memory is mainly divided into NAND flash memory and NOR flash memory. The storage cells in NAND flash memory are connected in series and are suitable for low-cost, high-density, high-speed programming or erasing data storage applications, such as solid state drives. The memory cells in NOR flash memory are connected in parallel, which is suitable for low-density, low-capacity, high-speed code storage applications, such as program storage in embedded systems. There are differences in characteristics and uses between the two, and there is a lack of substitution between them. In this case, NAND flash memory is defined as an independent related commodity market.
4.DRAM . RAM is a volatile memory in which data is lost in the event of a power outage. According to the different ways of data storage, RAM is mainly divided into SRAM and DRAM. SRAM uses transistors to store data and is usually used in high-speed applications. DRAM mainly uses capacitors to store data, which is usually used in computer memory, graphics cards and other electronic products. The price and speed of the two are different, and there is no substitute relationship between them. In this case, DRAM is defined as an independent related commodity market.
(2) relevant regional markets.
The goods involved in this case are supplied and purchased globally, suppliers compete globally, there is no obvious price difference in different countries, and the freight accounts for a low proportion of the final selling price, and there are no significant cross-border trade barriers. Therefore, the relevant regional markets of the above-mentioned commodities are defined as global, while examining the situation of the domestic market in China.
IV. Competition analysis
According to Article 27 of the Anti-monopoly Law, the General Administration of Market Supervision makes an in-depth analysis of the impact of this concentration on market competition from the aspects of the market share of the operators participating in the concentration in the relevant markets and their control over the market, the degree of market concentration in the relevant markets, and the impact of concentration on downstream user enterprises and other relevant operators. It is considered that this concentration has or may have the effect of excluding and restricting competition in the global and Chinese PCIe enterprise solid state disk market and SATA enterprise solid state disk market.
(1) the transaction will increase the market concentration of SATA enterprise-grade SSDs and enhance the market control of the entity after centralization.
In 2020, in the global SATA enterprise solid-state drive market, SK Hynix and the target business have a combined market share of 30%. 35%. Before trading, the Herfindahl index (hereinafter referred to as HHI) was 2544, with a high degree of market concentration. After centralization, the HHI was 2851, and the increment was 307. In the SATA enterprise solid state disk market in China, the combined market share of the target business and SK Hynix is 55% and 60%. Before the transaction, the HHI was 4139 and the market was highly concentrated. 4329 after trading, with an increment of 190. Trading will further increase market concentration and weaken market competition. At the same time, the transaction will integrate the patents and unique know-how of both sides, eliminate the close competitors of SK Hynix in the global and domestic markets, reduce the competitive constraints it faces, and further enhance the market control of the centralized entity.
(2) the transaction will improve the market concentration of PCIe enterprise-grade SSDs and enhance the control power of the entity after centralization.
In the global PCIe enterprise solid-state drive market in 2020, SK Hynix and its target business have a combined market share of 40% Mel 45%. Before the transaction, the HHI was 2775, and the market concentration was high. After the transaction, 3456, the increment is 681. In the PCIe enterprise solid state disk market in China, the combined market share of the target business and SK Hynix is 50%. 55%. Trading will further increase market concentration and weaken market competition. At the same time, the transaction eliminates the close competitors of SK Hynix in the global and domestic markets, reduces the competitive constraints it faces, and further strengthens the control of the centralized entity in the domestic market in China.
(3) concentration may enhance the motivation and ability of relevant market competitors to coordinate prices.
After the completion of the transaction, the number of main competitors in the SATA enterprise solid-state disk market was reduced from 4 to 3, and the total global market share was more than 90%. The number of main competitors in the PCIe enterprise solid-state disk market was reduced from 3 to 2, and the total global market share was more than 80%. The technology of solid state disk market is 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 express or implied means is reduced, and it is easier for operators to speculate on the pricing strategies of other competitors through the winning results. At the same time, there is more profit space for SSD market to coordinate price behavior, the behavior that deviates from coordination is easier to be found and restricted, and the motivation and ability of price coordination among competitors are further improved.
(4) the barriers to market entry are high, and it is difficult for new effective competitors to emerge in the short term.
Enterprise SSDs are mainly used in data center servers, and customers have high requirements for product quality and stability. New entrants often face obstacles such as capital and customer authentication at the same time, so it is difficult for new competitors to form effective competitive constraints on the centralized entities in the short term.
Negotiations with restrictive conditions
In the course of the examination, the General Administration of Market Supervision promptly informed the declarant of the examination opinions of the case that had or may have the effect of excluding or restricting competition, and held several rounds of discussions with the declarant on how to reduce the adverse impact of this concentration of operators on competition. With regard to the restrictive commitment submitted by the declarant, the General Administration of Market Supervision has assessed the effectiveness, feasibility and timeliness of the restrictive conditions in accordance with the interim provisions on the examination of operator concentration.
Upon assessment, the General Administration of Market Regulation believes that the additional restrictive commitment programme submitted by the declarant on 7 December 2021 (see annex) can reduce the adverse impact of this concentration of operators on competition.
VI. Review and decision
In view of the fact that the concentration of operators in the PCIe enterprise solid state disk and SATA enterprise solid state disk market has or may have the effect of excluding or restricting competition, according to the additional restrictive commitment plan submitted by the declarant, the General Administration of Market Supervision has decided to approve the concentration with additional restrictive conditions, requiring the entity after the concentration to perform the following obligations:
(1) PCIe enterprise solid state disk products and SATA enterprise solid state disk products shall not be supplied to the domestic market in China at unreasonable prices. The prices of PCIe enterprise solid state drive products and SATA enterprise solid state drive products sold to the domestic market in China shall not be higher than their average prices within 24 months prior to the effective date under the same terms of the transaction.
(2) continuously expand the output of PCIe enterprise solid state disk products and SATA enterprise solid state disk products within 5 years from the effective date.
(3) to continue to supply all products to the domestic market in China in accordance with the principles of fairness, reasonableness and non-discrimination.
(4) customers in the domestic market in China shall not be compelled or in a disguised form to purchase products exclusively from SK Hynix or any company controlled by SK Hynix; nor shall PCIe enterprise-grade solid-state disk products be forcibly bundled or bundled with other products, or SATA enterprise-grade solid state disk products with other products.
(v) to help a third-party competitor enter the PCIe enterprise SSDs and SATA enterprise SSDs markets.
(6) No written or oral agreement, decision or other synergistic act (including implied synergy) shall be reached with its main competitors in China to exclude or restrict competition in terms of sales price, output or sales volume.
Except for the implementation of restrictive conditions in accordance with this announcement, the additional restrictive commitment program submitted by SK Hynix to the General Administration of Market Regulation on December 7, 2021 is legally binding on SK Hynix, the target business and the post-centralized entity.
Five years after the date of entry into force of the restrictive conditions, the entity after centralization may apply to the General Administration of Market Supervision for the rescission of the conditions. The General Administration of Market Supervision will make a decision on whether to dissolve or not in accordance with the application and according to the situation of market competition. Without the approval of the General Administration of Market Supervision, the entity shall continue to comply with the restrictive conditions after the concentration.
The General Administration of Market Supervision has the power to supervise the trustee or to supervise and inspect the performance of the above obligations by the entity after the concentration. If the entity fails to perform or violates the above obligations after centralization, the General Administration of Market Supervision will deal with it in accordance with the relevant provisions of the Anti-monopoly Law.
This decision shall enter into force as of the date of announcement.
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