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20 Jun 2014

Yulchon Advises LG Corp. in Share Acquisition of Silicon Works Co. Ltd.

Representing LG Corp., LG Group's holding company, Yulchon's Antitrust Group obtained a quick merger clearance from the Korea Fair Trade Commission (the "KFTC") for LG Group's acquisition of 20% of the shares (i.e., a controlling interest) of Silicon Works Co. Ltd. ("Silicon Works"), a global display semiconductor manufacturer.

The primary regulatory issue regarding the transaction was that Silicon Works' competitors would be restricted from supplying products to LG Display Co., Ltd. ("LG Display"), a subsidiary of LG Group and global display panel manufacturer, thereby producing an anticompetitive effect. In arguing that the transaction would not raise any competitive concerns, Yulchon advanced the following arguments: (i) since manufacturers of display panels and display semiconductors supply their products globally, the relevant geographic market should be the worldwide market; (ii) the purpose of the transaction is to maximize the technical development capability by forming a closer relationship with Silicon Works that owns a superior non-memory semiconductor design technology and to ultimately enhance the competitiveness of LG Group's electronic and display panel businesses, rather than to engage in a greater number of transactions with Silicon Works; (iii) global display panel manufacturers other than LG Display have already completed a vertical integration with display semiconductor manufacturers or are actively pursuing such vertical integration; (iv) there are strong competitors in the market, including Samsung Electronics, Samsung Display, Innolux, AUO, Novaket, Renesas, and others with sufficient market shares and technological capabilities to keep LG Corp. in check even after the transaction; (v) LG Corp.'s ability to foreclose the market after the transaction will be substantially impaired by the market structure in which "set manufacturers" that incorporate display panels into their final products often designate their own display semiconductor suppliers when ordering display panels; (vi) there is no barrier to market entry since expert design companies such as Silicon Works can easily enter the market by subcontracting actual production to other companies with manufacturing facilities as long as they have the technical design capability.

Accepting Yulchon's arguments, the KFTC quickly granted an unconditional merger clearance.

Within the Antitrust Group, this project was supervised by partner Seuk Joon Lee and was handled by partner Seung Hyuck Han and associates Seung Min Lee and Keon Woong Kim.

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