The Ministry of Commerce of the People's Republic of China (the "MOFCOM") has received the application from MediaTek Inc.(the "MediaTek") and MStar Semiconductor, Inc. (the "MStar Taiwan") in connection with the cancellation of the additional restrictive conditions stipulated in the Announcement No.61 of 2013 (the "Announcement"). The MOFCOM has conducted an examination on such application and relevant matters are hereby announced as follows:
I. Background and examination procedures
On August 27, 2013, the MOFCOM released the Announcement, granting conditional approval for MediaTek’s merger by absorption of MStar Semiconductor, Inc. (Cayman) (the "MStar Cayman"), and requiring MediaTek, MStar Cayman and MStar Taiwan to fulfill relevant obligations. In September 2016, MediaTek and MStar Taiwan (collectively the "Parties") filed an application for cancelling the additional restrictive conditions stipulated in the Announcement. In November 2017, the Parties made a supplementary submission of new reasons and evidence.
After receiving the application, the MOFCOM has discussed with the Parties for several times to require a supplementary submission of evidence materials, sought for opinions from relevant government departments, industry associations, downstream enterprises and other entities in written form, and verified the performance of the Parties in fulfilling their obligations by consulting other parties concerned. According to the Anti-Monopoly Law of the People's Republic of China (the "Anti-Monopoly Law"), the Provisions on Imposing Restrictive Conditions on the Concentration of Undertakings (for Trial Implementation) and the requirements of the Announcement, the MOFCOM laid emphasis on examining the implementation of the Announcement and the changes in market competition, and comprehensively evaluated the reasons for cancelling the restrictive conditions and the possible impact of it on the competition situation in relevant markets.
II. Implementation hereof
According to the report on the performance of obligations by the Parties and the working report of the supervision trustee, during the implementation of the Announcement, upon the approval of the MOFCOM, the Parties have entrusted the independent supervision trustee to make supervision over their performance in fulfilling their obligations, and the Parties have regularly submitted written reports to inform the MOFCOM of the status of fulfilling their obligations. The supervision trustee has conducted supervision and verification over the Parties' performance in fulfilling their obligations by such methods as reviewing various reports submitted by the Parties, on-site verification and interviews, and giving questionnaire survey in written from to or having interviews with major TV manufacturers in the Chinese mainland, and submitted relevant working reports on a quarterly basis. After investigation and verification, so far there was no evidence to prove that the Parties have violated the Announcement. Therefore, upon comprehensive evaluations, the MOFCOM believed that the Parties have fulfilled all their obligations as required in the Announcement during the implementation thereof.
III. Competition analysis
The MOFCOM has, in accordance with the law, conducted evaluations on changes in market competition and the effect of the cancellation of restrictive conditions on market competition. After such evaluations, it is proved that significant changes have occurred in the competition situation of relevant markets, and that it is difficult for the cancellation of restrictive conditions to have an exclusive or a restrictive effect on market competition.
(I) Market shares of the Parties declined significantly.
According to the Announcement, the market shares of MStar Cayman and MediaTek were respectively 65% and 15% in the LCD TV main control chip market of China, with a total market share of 80%. Since 2013, the market shares of MediaTek and MStar Taiwan has continued to decline. According to the data from the independent third party, in the first half of 2017, the market shares of MStar Taiwan and MediaTek were respectively about 40%-45% and 5%-10% in the LCD TV main control chip market of China, with a total market share of less than 50%, representing that their market shares have declined obviously.
(II) New competitors entered into relevant markets.
According to the Announcement, except for MediaTek and MStar Cayman, other market participants had very small market shares in the LCD TV main control chip market of China, and also there were barely new entrants. Since 2013, with successive entry into relevant markets of RDA Microelectronics, Inc. (the "RDA"), Shenzhen Jewel Electronic and Technology Co., Ltd. (the "Jewel") and Hisilicon Technologies Co., Ltd. (the "Hisilicon") and continuously-rising market shares of Novatek Microelectronics Corp. (the "Novatek") and Realtek Semiconductor Corp. (the "Realtek"), an effective competition constraint was formed toward the Parties. According to the data from the independent third party, in the first half of 2017, the market shares of four competitors including Realtek, RDA, Samsung and Novatek reached about 5%-10%, which was more than that of MediaTek. In addition, certain competition constraints also came from Hisilicon and Jewel over MediaTek.
(III) There was a significant decline in the downstream TV manufacturers' degree of dependence on the Parties.
According to the Announcement, six major TV manufacturers in the Chinese mainland took MediaTek and MStar Cayman as their main chip supplier, representing that there was certain dependence by these companies on MediaTek and MStar Cayman. Since 2013, with the increase of the number of new market entrants, Chinese TV manufacturers have strengthened their cooperation with other chip suppliers. In recent years, several Chinese chip companies have been incorporated into their supplier system, representing that there was a significant decline in their degree of dependence on MediaTek and MStar Taiwan.
(IV) The cancellation of restrictive conditions may avoid overlapping investment and reduce the research and development costs by the Parties.
The Parties pointed out that MediaTek and MStar Taiwan had to make overlapping investment in certain technologies because they are required by the restrictive conditions to undertake to continuously make investment in the research and development of TV chip products respectively and to develop similar competitive products. Therefore, the cancellation of restrictive conditions may avoid overlapping investment and reduce the research and development costs by the Parties.
(V) The industrial characteristics studied in the Announcement were further revealed.
According to the Announcement, the MOFCOM, after studying the actual situation of the industries relating to relevant products in depth, considered that the industrial characteristics and the change of supply and demand of the LCD TV main control chip, to some degree, offset the adverse effects brought by the concentration on competition, including that: the competition structure of the LCD TV main control chip market is unstable and this transaction will provide other participants in the market with growing opportunities. In recent years, the industrial characteristics and development trends studied in the Announcement have been further revealed, which was showed in the following two aspects, first, the daily-increasing promotion of smart TV chip made the boundary between TV chip and cell phone chip/computer chip more invisible; second, after this transaction, the TV manufacturers in the Chinese mainland began to seek other competitors as suppliers, and several new competitors successfully entered into the market.
IV. Examination decision
According to Article 27 of the Anti-Monopoly Law and Articles 25, 26, 27 and 28 of the Provisions on Imposing Restrictive Conditions on the Concentration of Undertakings (for Trial Implementation), the MOFCOM decided to cancel the additional restrictive conditions stipulated in the Announcement.
The Announcement shall come into force as of the date of promulgation.
Ministry of Commerce of the People’s Republic of China
February 9, 2018