M&A Archives – Southern California Law Review

In 2016, Qualcomm announced a $47 billion acquisition of Dutch chipmaker NXP Semiconductors to diversify Qualcomm’s portfolio beyond the slowing smartphone market. While regulators worldwide approved the deal, China’s antitrust agency stalled, ultimately forcing Qualcomm to abandon the merger in 2018, sparking widespread speculation that China was willing to weaponize its merger review process in the semiconductor industry, a key battleground in the escalating U.S.-China tech rivalry. Nearly a decade later, with the second Trump administration in office and tensions continuing to escalate, this Note examines China’s merger review enforcement in the semiconductor industry through three landmark decisions: Qualcomm’s attempted acquisition of NXP Semiconductors, SK Hynix’s acquisition of Intel’s NAND memory chip business, and Intel’s attempted acquisition of Tower Semiconductor. This Note finds that China employs a dual approach under its Anti-Monopoly Law (“AML”)—while most merger reviews reflect increasing standardization and efficiency, cases in sensitive industries like semiconductors are driven by mercantilist policies rather than antitrust principles, subjecting transactions to prolonged delays, stringent conditions, and opaque decision-making enabled by China’s unique political-legal structure. This Note further argues that China’s mercantilist use of the AML is evolving beyond a purely reactive tool, as China’s State Administration for Market Regulation has begun deploying merger review as an affirmative instrument of industrial policy, selectively targeting foreign firms from countries perceived as lacking sufficient geopolitical influence to retaliate. As U.S.-China tensions show no signs of abating, China’s selective mercantilist application of the AML will persist—and likely expand—leaving foreign semiconductor firms to navigate an increasingly weaponized regulatory landscape.

Introduction

In 2016, Qualcomm, a leading American chipmaker, announced its $47 billion acquisition of NXP Semiconductors, a Dutch company specializing in automotive and Internet of Things (“IoT”) semiconductors—technologies connecting everyday devices such as watches, home electronics, and industrial equipment to the Internet.¹ With this deal, Qualcomm, traditionally dominant in the cell phone–chip market, sought to diversify its portfolio as competition in the smartphone sector intensified and demand stagnated.² By expanding into high-growth markets like automotive and IoT technologies, Qualcomm aimed to secure a stronger foothold in the future of connected devices.³ The market responded positively to the announcement, with Qualcomm’s stock rising over 3% immediately following the news.⁴

The transaction received swift approvals from regulators in the United States, the European Union (“EU”), and several other jurisdictions, leaving China as the final antitrust hurdle.⁵ To some degree, China’s holdout was unexpected.⁶ Since China’s enactment of its Anti-Monopoly Law (“AML”) in 2008, which established its merger review regime, Chinese enforcement had largely followed the lead of other major antitrust jurisdictions, particularly the EU.⁷ However, the deal faced significant resistance from China’s State Administration for Market Regulation (“SAMR”), which oversees merger reviews.⁸ After more than ten months of review, SAMR failed to issue a ruling before the deal’s deadline, forcing Qualcomm to abandon the transaction in 2018 and effectively blocking the merger.⁹

SAMR’s handling of the Qualcomm–NXP merger sent shockwaves across global markets.¹⁰ Many commentators, including U.S. officials and the CEOs of both Qualcomm and NXP, argued that the decision was politically motivated, reflecting the escalating U.S.-China trade tensions at the time, rather than being grounded in traditional antitrust concerns.¹¹ Since then, China’s antitrust authority has shown an increased appetite to act separately and independently in semiconductor cases. For instance, in 2020, South Korea–based SK Hynix was required to facilitate the entry of an unnamed local competitor as a condition for acquiring Intel’s NAND memory (a type of nonvolatile flash memory widely used in solid-state drives and consumer electronics) and storage business.¹² In 2023, U.S.–based Intel terminated its acquisition of Israeli foundry, Tower Semiconductor, again due to China’s failure to approve the deal.¹³ Most recently, in 2024, China launched an investigation into U.S.–based company Nvidia for allegedly violating commitments made during its acquisition of

Israeli chip designer Mellanox Technologies¹⁴—a deal that had been cleared unconditionally in both the United States and the EU.¹⁵

These decisions by SAMR in the semiconductor industry illustrate China’s uneven application of the merger review process under the AML. On the one hand, broader trends highlight increasing standardization and efficiency in most merger reviews, as China positions itself as one of the largest consumer markets in the world and one of the three major antitrust jurisdictions alongside the United States and the EU.¹⁶ In 2023, SAMR closed 797 merger review cases in total.¹⁷ Of these, 782 (approximately 98%) received unconditional approval.¹⁸ Generally, SAMR took an average of three weeks to close a case.¹⁹ On the other hand, cases in sensitive industries like semiconductors stand out as exceptions. In such cases, transactions are subject to protracted delays, stringent conditions, and opaque decision-making processes.²⁰ These decisions appear to deviate from traditional antitrust norms and are motivated by mercantilist policies rather than antitrust principles.²¹ Such outcomes reflect SAMR’s strategic use of merger reviews to align with the economic and national security priorities of the party-state, particularly in industries critical to China’s industrial and geopolitical ambitions.

This dual approach is also consistent with China’s broader dual political-legal system under Chinese President Xi Jinping’s leadership. While the body of law is becoming sophisticated and is aligning with global legal norms, most cases are now handled with greater standardization and efficiency, and matters deemed sensitive are consistently handled outside the legal framework to advance the party-state’s interests.²² This dual system seemingly allows China to leverage its antitrust regime both as a means of maintaining competition, protecting consumers, and promoting innovation, as well as a mercantilist tool to advance the economic and national security interests of the party-state, creating a unique and unpredictable regulatory environment for foreign companies.

This Note is organized as follows: Part I examines the unique political-legal system in China, where weak judicial agencies defer heavily to administrative agencies within their domains. In this context, it provides an overview of China’s merger review regime under the AML, tracing its evolution and progression toward greater efficiency and standardization under SAMR. Part II explores China’s state interests and its long tradition of leveraging mercantilist economic policies to advance these interests. With this foundation, I then analyze the intersection of Chinese State priorities and the semiconductor industry, highlighting the economic and national security concerns that shape China’s regulatory decisions. Part III analyzes key semiconductor merger cases reviewed under the AML to evaluate whether SAMR’s decisions in these cases were driven by traditional antitrust concerns or by mercantilist objectives aimed at advancing China’s economic and national interests. This Part then compares the patterns revealed in these semiconductor cases to the broader trends in AML enforcement and assesses the potential long-term effects of China’s uneven application of its antitrust regime. Part IV predicts the future of AML merger enforcement in sensitive industries like semiconductors, arguing that the mercantilist dual application of the law will continue but will be constrained within a selective number of cases.

I. Anti-Monopoly Law and China’s Merger Control Regime

A. China’s Judicial System and the State Administration for Market Regulation

1. The Preeminence of the State Power and the Chinese Political-Legal System

Unlike most Western democracies, in which the government is divided into coequal legislative, judicial, and executive branches, the Chinese State government is a single, unified political-legal system known as zhengfa xitong (政法系统).²³ Within that system, there are legislative bodies, administrative and regulatory organs, courts, prosecutors, and police, each of which exercises often overlapping legislative, judicial, and administrative powers.²⁴ Further, China’s vast state bureaucracy operates under a unique system in which competing government organs control distinct domains of authority, allowing legislative, administrative, and judicial bodies to each enact rules and policies within their respective areas.²⁵ As a result, although China formally has one main legislative body, the National People’s Congress, the State Council—a cabinet-like body—and the numerous ministries, commissions, administrations, bureaus, departments, and offices under its authority, all possess legislative power to enact rules and policies within their respective domains.²⁶

Among the government organs, three are considered judicial bodies: the courts, procuratorates, and public security bureaus. Collectively, they are referred to as gongjianfa (公检法).²⁷ The hierarchical court system begins with the People’s Courts at the local level, followed by the Intermediate People’s Courts, High People’s Courts, and, at the top, the Supreme People’s Court.²⁸ The courts work closely with the public security bureaus and the procuratorates, which conduct criminal prosecutions and investigations on behalf of the State.²⁹

The Chinese Communist Party (“CCP”) maintains de facto control over all aspects of the Chinese political-legal system.³⁰ De jure, there is a separation between the CCP and the Chinese State as the Constitution of the People’s Republic of China vests power and authority in the political and administrative structures that form the lawful government of China.³¹ In reality, however, the CCP and the State government operate as one, with the CCP exerting control through informal mechanisms, such as issuing policy directives, and formal mechanisms, such as appointing and removing government officials at all levels and across all functions of government bodies.³²

Since Xi assumed power as the CCP’s general secretary in 2012, he has emphasized the priority of “law-based governance” (依法治国).³³ In response, CCP-led reforms have increased standardization across political and legal institutions, allowing them to efficiently handle complex matters daily to ensure social stability and economic growth.³⁴ It is important to note that Xi’s concept of the “rule of law” differs significantly from the Western liberal tradition and aligns more closely with the “rule by law” principles of traditional Chinese Legalism.³⁵ Xi, who frequently references Legalist scholars such as Han Fei and Shang Yang with admiration, intends to use law as an instrument to strengthen governance rather than to limit state power.³⁶ While Xi’s law-based governance seeks to apply his power more equitably and uniformly, its purpose is not to constrain the CCP’s authority.³⁷ The party-state thus adopts a dual political-legal system: while the majority of legal cases are adjudicated under an increasingly sophisticated body of law, matters deemed sensitive are consistently handled outside the legal framework to advance the party-state’s interests.³⁸

2. Key Actors in China’s Merger Control Regime

Before 2018, AML enforcement was carried out by three main agencies: the Price Supervision and Anti-Monopoly Bureau of the National Development and Reform Commission (“NDRC”), the Anti-Monopoly and Unfair Competition Enforcement Bureau of the former State Administration for Industry and Commerce (“SAIC”), and the Anti-Monopoly Bureau of the Ministry of Commerce (“MOFCOM”). The Price Supervision and Anti-Monopoly Bureau of the NDRC was responsible for enforcing price supervision, addressing price violations and monopolies, and managing appeals related to price infractions.³⁹ The Anti-Monopoly and Unfair Competition Enforcement Bureau of the former SAIC oversaw enforcement related to nonprice abuses of dominant market positions and monopoly agreements involving nonprice coordination.⁴⁰ MOFCOM was responsible for merger review and control.⁴¹

In March 2018, China’s State Council announced the creation of a unified market regulator, the State Administration for Market Regulation.⁴² SAMR consolidated the functions of the three previous enforcement authorities and became responsible for all antitrust enforcement in China.⁴³ Since then, SAMR has strengthened the overall enforcement of the AML, with a particular focus on merger control.⁴⁴

B. Overview of the Anti-Monopoly Law

1. History and Scope of the AML

Although efforts to reform and initiate the drafting of anti-monopoly legislation started in 1994, it took thirteen years for the AML to be finalized, marking the longest drafting process for any law in modern Chinese history.⁴⁵ Enacted on August 1, 2008, the AML covers monopoly agreements, abuse of market dominance, anticompetitive mergers, and administrative monopolies.⁴⁶ Articles 13 and 14 of the AML prohibit price fixing, output restrictions, market division, and specific vertical agreements like fixing or setting minimum resale prices.⁴⁷ Article 6 restricts dominant businesses from engaging in six types of abusive practices, including unfair pricing and discriminatory dealings.⁴⁸ Articles 20 and 31 state that mergers and acquisitions must undergo competition review, especially those involving foreign parties.⁴⁹ Article 8 forbids public authorities from abusing their administrative powers to limit competition.⁵⁰ Penalties for violations include fines of up to 10% of the previous year’s turnover, confiscation of illegal gains, and invalidation of unlawful agreements.⁵¹

On August 1, 2022, after two initial drafts by SAMR, China finalized and implemented amendments to the AML.⁵² These amendments introduced significant changes, including imposing higher penalties for antitrust violations, cautioning dominant technology firms against market abuse through digital tools such as algorithms, enabling public prosecutors to initiate civil public interest litigation against monopolies harming social welfare, and simplifying judicial proceedings by allowing enforcement agency findings of monopolistic conduct to serve as sufficient evidence in civil litigations.⁵³ For the merger review process, the amended AML permits SAMR to suspend the review period if (1) filing parties fail to provide essential materials; (2) new situations arise requiring further investigation; or (3) filing parties request a suspension to assess potential remedies.⁵⁴ Following these amendments, SAMR introduced a series of rules and guidelines in 2023 to clarify and enforce the revised AML.⁵⁵ Among them, key merger control provisions include higher notification thresholds and a focus on “killer acquisitions,” mandating filings if an acquirer with annual revenues over RMB 100 billion (approximately $14.6 billion) acquires a company with a market capitalization of at least RMB 0.8 billion (approximately $117 million) and if the acquired company’s Chinese revenue constitutes over one-third of its global revenue.⁵⁶

2. Merger Review Process Under the AML

Under the AML, if a transaction is deemed to be a “concentration” and the turnover threshold is met, an obligation to submit antitrust notification to SAMR is triggered.⁵⁷ “[C]oncentration” includes the following: (1) mergers between undertakings; (2) acquiring control of other undertakings through the acquisition of shares or assets; and (3) acquiring control of other undertakings, or the ability to exercise decisive influence over other undertakings, by contract or other means.⁵⁸ The AML does not provide an explicit definition for control or decisive influence.⁵⁹ The 2018 Business Operators Guiding Opinions and the updated 2023 Provisions made some clarifications. The 2018 Opinions introduced a “decisive influence” test, considering factors such as transaction documents, articles of association, and other legal or factual elements indicating control.⁶⁰ The 2023 Provisions build on this, adding criteria for determining control, including the transaction’s purpose, the target company’s shareholding structure, voting mechanisms, board composition, appointment of senior management, and other strategic factors that could indicate influence over the target company’s operations.⁶¹ It is worth noting that these documents, while important for assessing control, are not viewed as exclusive criteria. In practice, SAMR has broad discretion to interpret these terms and direct parties to file.⁶² The turnover threshold, as noted previously, had been updated in the 2022 amendments to reflect economic growth.⁶³ Currently, undertakings must seek merger clearance from SAMR if their combined global turnover exceeds RMB 12 billion (approximately $1.7 billion) with each of at least two parties generating over RMB 800 million (approximately $113.5 million) in China, or if their combined Chinese turnover exceeds RMB 4 billion (approximately $568 million) with each of two parties exceeding RMB 800 million.⁶⁴

If a transaction triggers an antitrust notification, the parties must obtain clearance from SAMR or wait for the 180 calendar day–review period to expire without objection or a request for further information.⁶⁵ The clearance process consists of two stages: (1) the pre-consultation phase, during which the parties can arrange an informal meeting with regulators to discuss major issues regarding the transaction; and (2) the formal review phase, which starts once the regulator deems the notification complete.⁶⁶ While the regulator is statutorily required to complete the review phase within a total of 180 calendar days, there is no statutory deadline for the pre-consultation phase.⁶⁷ Therefore, the period between the parties’ antitrust notification and the start of the formal review procedure is unpredictable and ranges from a few days to several months.⁶⁸

Once the formal review process starts, the regulator may initiate an in-depth “phase II” investigation for another ninety calendar days, with the option to extend for another sixty days under special circumstances, or with the parties’ consent, if it considers the transaction has, or may have, the effect of eliminating or restricting competition.⁶⁹ The 2022 amendments also enable SAMR to suspend the merger review process and extend the timeline when reviewing complex transactions, in particular those involving remedy negotiations.⁷⁰ Considering this is a lengthy process, SAMR offers a “simplified procedure” for smaller transactions, in which the parties’ combined market shares are below 15% and their individual shares in related markets are below 25%.⁷¹ Overseas joint ventures with no operations in China also qualify for this fast track–review process.⁷² The vast majority of merger reviews seem to be closed under the simplified procedure.

As noted above, according to SAMR, in 2023 it closed 797 merger review cases in total.⁷³ Of these, 782 (approximately 98%) received unconditional approval, 4 received conditional clearance, and 11 were withdrawn by the filing parties after SAMR’s acceptance of their case.⁷⁴ Overall, SAMR took an average of three weeks to close a case.⁷⁵ However, for conditional clearances, SAMR took an average of 309 days to complete.⁷⁶

During the merger review process, SAMR conducts conventional competition analyses by examining transactions between competitors, assessing combined market shares, and evaluating the risk that a transaction could raise consumer prices or stifle innovation.⁷⁷ It is worth noting that, besides competition concerns, AML also requires SAMR to consider the impact of a transaction on China’s “national economic development,” including whether it conflicts with China’s industrial policies or domestic interests.⁷⁸ This means SAMR must consult a wide range of Chinese stakeholders, in both public and private sectors, before making any determination.⁷⁹

If SAMR decides that transactions raise significant concerns, it may block them or grant conditional approvals subject to remedies, such as rights and licensing grants, agreement modifications, or divestment.⁸⁰ In some rare cases, SAMR can also delay the review process for so long that parties decide to abandon the transaction.⁸¹ However, if parties fail to notify a transaction or complete a transaction before regulatory approval, SAMR can (1) order the transaction to be undone; (2) fine up to RMB 5 million (approximately $0.7 million) for cases without competition concerns or up to 10% of the notifying party’s prior-year turnover for anticompetitive mergers; and (3) require measures to restore pre-transaction market conditions, such as asset divestitures.⁸² Fines may increase up to 5 times if a violation is “particularly serious,” potentially reaching 50% of the notifying party’s turnover.⁸³

II. China’s National Economic Interests and the Semiconductor Industry

A. China’s Unique Economic Structure and Interests

The “effect on China’s national economy” is a special consideration in merger review under the AML.⁸⁴ This requirement may seem redundant, as traditional merger review criteria—such as preventing market concentration and maintaining competition—naturally improve economic performance. Conversely, if a transaction leads to market concentration, its impact on the economy is obviously harmful, which will typically warrant prohibition under conventional merger review criteria. So, why does the AML include this specific language? Understanding this requires examining the unique structure of the Chinese economy.

The Role of Nonmarket Institutions in the Chinese Economy

A key feature of the Chinese economy is its substantial nonmarket components. Since the start of its market reforms in 1978, China has achieved unparalleled economic growth, increasing its economic output by more than 3,000% and becoming the second-largest market by gross domestic product.⁸⁵ However, despite this impressive growth, the CCP has maintained its socialist roots and has never fully adopted market economy policies.⁸⁶ Instead, CCP leaders have pursued a gradualist approach, slowly reducing the industrial output of state-owned enterprises (“SOEs”) and lifting restrictions on private businesses and foreign investments while still retaining significant control over the economy.⁸⁷

Two schools of thought have emerged regarding the role of nonmarket institutions in China’s economy: the experimentalist and convergence schools.⁸⁸ The experimentalists believe that China has been attempting, with considerable success, to invent a unique Chinese economic model.⁸⁹ And in the Chinese model, the nonmarket institutions play important roles in easing social conflicts and ensuring national economic stability.⁹⁰ The convergence scholars argue that China has achieved economic success despite gradualism and that the nonmarket aspects are dragging China back from unleashing its full potential.⁹¹ They believe that, in the end, the Chinese economy will converge with those of nonsocialist–market economies, especially those in East Asia.⁹²

Under Xi’s leadership, however, the CCP has tightened its grip on private businesses as economic growth slows.⁹³ It demands businesses to strictly conform to the aims of the CCP, cracking down on entrepreneurs who dare to challenge the state prerogatives.⁹⁴ It also tightens the regulatory pressure on financial activities, such as borrowing and seeking initial public offerings overseas while SOEs—called “an important pillar and strength for our party” by Xi—were largely insulated.⁹⁵ It seems to suggest that the nonmarket institutions are not only here to stay but also to play an increasingly dominant role in the Chinese economy.

China’s Mercantilist Economic Policy

Many scholars attribute the authoritarian CCP regime’s legitimacy to its appeal to nationalism and its success in achieving sustained economic growth.⁹⁶ Under conventional wisdom, economic growth would challenge the CCP’s one-party rule, as satisfying material needs could lead to demands for nonmaterial needs, such as political participation and pluralism, while social inequalities might fuel a sense of injustice.⁹⁷ Consequently, China’s economic policies are closely linked with nationalism.⁹⁸ For decades, under the CCP’s leadership, China has followed a mercantilist economic strategy, using government regulations to boost exports and thus sustain growth.⁹⁹ As Justin Yifu Lin, an influential Chinese economist under Xi’s leadership,¹⁰⁰ remarked, China’s success in generating immense wealth through massive exports is not only an economic achievement but also a vindication of its “century of humiliation”—a period from 1839 to 1949 when China lost control of large territories to foreign powers—and a testament to Chinese leaders’ resolve to prevent a recurrence.¹⁰¹

This is not to say that mercantilism is unique to China. Following the 2008 global financial crisis, many commentators have observed a paradigm shift in Western nations toward mercantilist economic policies.¹⁰² Under the leadership of President Trump from 2016 to 2020, the United States imposed punitive trade sanctions in the form of heavy tariffs against China and its other trading partners.¹⁰³ Some commentators viewed these measures as attempts to coerce trade concessions,¹⁰⁴ while others defended them as justified responses to China’s unfair trade practices, such as forced technology transfer, cyber-enabled theft of U.S. intellectual property and trade secrets, discriminatory licensing practices, and state-funded strategic acquisitions of U.S. assets.¹⁰⁵ Ultimately, the Trump administration, as Trump himself wrote in a tweet,¹⁰⁶ believed these policies would increase U.S. wealth and contribute to its “great economic results.” The Biden administration largely kept Trump’s measures in place, even expanding tariffs on steel, electric vehicles, solar panels, and other goods imported from China.¹⁰⁷

However, unlike the United States, which primarily focuses on trade policies to boost exports and economic growth,¹⁰⁸ China uses laws and industrial policies to regulate its internal economy in order to increase its exports while erecting barriers for foreign goods.¹⁰⁹ For instance, China has used its Foreign Investment Law (prior to 2020) and its “Made in China 2025” initiative to subsidize and encourage mandatory technology transfers to SOEs to turn them into “national champions” to compete with multinational corporations on the world stage.¹¹⁰ Hence, the language of the AML, which requires considering a transaction’s “effect on China’s national economy,”¹¹¹ should also be interpreted under this context, in which the regulators are instructed to prohibit mergers that are adverse to China’s mercantilist economic policy.

China’s “Core Interests”

China’s economic interests are also closely tied to several domestic and foreign priorities that the CCP deems nonnegotiable.¹¹² They are termed “core interests” or hexin liyi (核心利益) in state media and official statements.¹¹³ In 2009, State Councilor Dai Bingguo defined China’s core interests in three aspects: (1) fundamental system and state security; (2) state sovereignty and territorial integrity; and (3) stable economic and social development.¹¹⁴ A 2011 white paper from the State Council added “peaceful development” and “national reunification” to this list.¹¹⁵

Since Xi’s ascension to power in 2012, the concept of core interests has been increasingly invoked, reflecting China’s growing strength and confidence.¹¹⁶ Xi stated, “[China] will never give up our legitimate rights and will never sacrifice our national core interests. No country should presume that we will engage in trade involving our core interests or that we will swallow the ‘bitter fruit’ of harming our sovereignty, security or development interests.”¹¹⁷ During the recent trade war with the United States, Chinese State media reinforced that core interests are nonnegotiable and will not be compromised.¹¹⁸

B. The Politics of the Semiconductor Industry

Semiconductors are the lifeblood of the digital economy.¹¹⁹ They make vital components for most modern electronics that are essential to people’s daily lives, including consumer electronics, computers, telecommunication equipment, automobiles, and machine tools.¹²⁰ In addition, semiconductors have high military importance as they improve the military system through artificial intelligence (“AI”).¹²¹ As a testament to its significance, the global semiconductor industry has totaled $526.8 billion in 2023,¹²² and some project the industry to reach trillion-dollar sales per year by 2030.¹²³

Because of the essential economic and national security roles semiconductors play in global geopolitics, the global semiconductor market has transformed into a battlefield in which major powers, such as the United States and China, struggle to establish their leadership in the industry.¹²⁴ The United States established itself early as a global leader in the semiconductor industry through technological innovations.¹²⁵ In 1947, Bell Telephone’s invention of the transistor launched the microchip era, followed by Jack Kilby of Texas Instruments and Robert Noyce of Intel, who propelled the industry forward with the integrated circuit in the late 1950s.¹²⁶ In 1970, Intel introduced the dynamic random access memory (“DRAM”), a crucial component for computers and electronics.¹²⁷ In the following decades, American companies led global semiconductor production, dominating 98% of the U.S. market and 70% internationally by the mid-1970s.¹²⁸ While there was a brief period in the 1980s in which Japan overtook the United States as the largest semiconductor market, especially in memory chips and microprocessors, the United States quickly restored its market leadership in the 1990s.¹²⁹ The dominance continues today as the U.S. semiconductor sector generated a whopping $70.1 billion in total export values in 2024.¹³⁰

In recent decades, however, the United States’ share in global semiconductor production has shrunk to 12% in 2021, down from 37% in 1990.¹³¹ This decline is partly attributable to the rise of the semiconductor industries in Taiwan and South Korea. Taiwan has established itself as the global leader in advanced semiconductor manufacturing,¹³² while South Korea is home to some of the world’s largest chip producers, including Samsung and SK Hynix.¹³³ These nations capitalized on U.S.-Japan trade tensions in the 1980s, leveraging generous government subsidies and a supply of skilled, affordable labor to achieve semiconductor “leapfrogging” over subsequent decades.¹³⁴ In recent decades, the emergence of China as a major chip producer further exacerbated the weakening of U.S. semiconductor production.¹³⁵ In 2015, China launched Made in China 2025, an industrial policy aimed at reducing dependence on foreign technology and establishing dominance in global high-tech manufacturing.¹³⁶ The policy set ambitious targets: By 2025, China aimed for 70% self-sufficiency in high-tech industries, with the goal of global leadership by 2049, the centennial of the People’s Republic of China.¹³⁷ In the semiconductor sector, the policy aimed to increase domestic chip production to 40% by 2020 and 70% by 2025.¹³⁸

To achieve these objectives, China established three substantial state-backed investment funds, totaling RMB 138.7 billion (approximately $21 billion) in 2019, RMB 204 billion (approximately $31.6 billion) in 2021, and RMB 344 billion (approximately $47.5 billion) in 2024, which subsidized domestic chip producers and drove SOEs to acquire foreign intellectual property.¹³⁹ This policy has yielded substantial results: China now holds nearly a quarter of global 300mm chip manufacturing capacity, up from 12% in 2014, as domestic producers increasingly displaced multinational operations.¹⁴⁰ Semiconductor Manufacturing International Corporation, China’s leading chip foundry, has tripled its revenue and doubled its capacity, making it the world’s third-largest foundry.¹⁴¹ In general, China has also built up an impressive memory chip industry from nothing and now has a competitive range of fabless chip designers producing advanced AI chips, microcontrollers for industrial applications, and power management chips for electric vehicles.¹⁴²

The rapid growth of China’s semiconductor industry has triggered significant geopolitical resistance, particularly from the United States.¹⁴³ In October 2022, the Biden administration introduced export controls to restrict China’s access to advanced U.S. semiconductors and technology.¹⁴⁴ These controls were further tightened in 2023 and 2024, banning the export of the latest chip production equipment to China, leaving Chinese manufacturers two to three generations behind their counterparts in Taiwan, South Korea, and the United States in producing leading edge–logic chips.¹⁴⁵ Some of China’s state owned–memory chip makers, such as Yangtze Memory Technologies Co. (“YMTC”), have also been hit with damaging sanctions that have cut off their ability to serve global markets.¹⁴⁶

In addition to sanctions and export controls, the Biden administration enacted the CHIPS and Science Act of 2022, aimed at boosting U.S. competitiveness in semiconductor manufacturing through government investment.¹⁴⁷ The Act provides $50.3 billion over five years, plus $550 million annually from fiscal years 2023–2027, to enhance U.S. leadership in semiconductor production and to fund broader scientific and technological research.¹⁴⁸ Currently, while the United States continues to dominate global semiconductor industry revenues—largely due to its leadership in advanced chip research, design, and equipment production—approximately 75% of global chip manufacturing capacity is concentrated in Taiwan, South Korea, China, and Japan. Five major companies—Samsung (South Korea, 19%), Taiwan Semiconductor Manufacturing Company (“TSMC”) (Taiwan, 13%), Micron (United States, 10%), SK Hynix (South Korea, 9%), and Kioxia/Western Digital (Japan, 6%)—together control 57% of global manufacturing capacity.¹⁴⁹ Taiwan, in particular, accounts for 92% of the world’s fabrication capacity for the most advanced logic chips, while South Korea leads with 44% of memory chip production capacity.¹⁵⁰ While the CHIPS and Science Act’s impact has yet to be fully seen, it underscores the U.S. government’s commitment to bolstering its semiconductor industry, especially in manufacturing, to address geopolitical risks, safeguard national security, and build economic resilience by reducing reliance on vulnerable global supply chains and promoting domestic production through substantial subsidies.¹⁵¹

Figure 1. Share of Global Semiconductor Value Chains by Activity, 2021

III. Comparative Studies on Key Decisions in The Semiconductor Industry under THE AML

As discussed above, China employs a dual political-legal system, in which an increasingly sophisticated body of law is applied with efficiency and standardization across most sectors, but cases deemed sensitive to the party-state’s interests remain susceptible to political and economic considerations.¹⁵² The semiconductor industry, as highlighted in the previous Section, is a sector of paramount importance to the Chinese State, given its strategic role in national security and economic development.¹⁵³ This Part examines key merger cases in the semiconductor industry, including Qualcomm and NXP, SK Hynix and Intel NAND, and Intel and Tower Semiconductor, in which SAMR’s decisions diverge notably from those of regulators in other major jurisdictions, such as the United States and the EU. Through these cases, I assess whether SAMR’s enforcement of the AML reflects the same dual system in which merger reviews in sensitive industries are influenced by broader state interests rather than traditional antitrust principles.

A. Qualcomm’s Acquisition of NXP

In October 2016, Qualcomm announced its agreement to acquire NXP Semiconductors for $110 per share in cash, valuing the deal at approximately $47 billion.¹⁵⁴ At the time, the demand for chips in the IoT sector—enabling connectivity for devices such as watches, automobiles, and home electronics—was rapidly increasing while demand for smartphones and personal computers was slowing.¹⁵⁵ This shift triggered a wave of mergers as traditional chipmakers sought to expand into the IoT market by acquiring companies with established success in the field.¹⁵⁶ Qualcomm, an American chipmaker based in San Diego known primarily for its smartphone chips, pursued this transaction to achieve the same objective.¹⁵⁷ NXP, with a strong foothold in automotive, industrial, and consumer IoT chips and a global customer base of over 25,000, presented an opportunity for Qualcomm to diversify and enter high-growth industries.¹⁵⁸

Qualcomm and NXP, to some level, operated in overlapping semiconductor markets, particularly in automotive semiconductors and communication technologies, which heightened the risk of market concentration.¹⁵⁹ In communication technology, Qualcomm held a dominant position as a primary innovator behind 3G and 4G/LTE standards, owning a significant share of standard-essential patents (“SEPs”), meaning that patents were required to follow the recognized technical standards critical to these technologies.¹⁶⁰ Qualcomm’s licensing model, requiring manufacturers to pay royalties for using its patented technologies, has drawn regulatory scrutiny in the past.¹⁶¹ In 2015, following an investigation launched in 2013, China’s NDRC found that Qualcomm violated the AML by leveraging its patents to maintain its dominance in the upstream chip design market.¹⁶² Qualcomm settled with the Chinese authorities, agreeing to pay a $975 million fine and implement changes to its patent licensing practices in China.¹⁶³ Some commentators viewed China’s action as having been motivated at least partially by mercantilist objectives to favor domestic chip and device producers.¹⁶⁴ In 2017, the Federal Trade Commission (“FTC”) sued Qualcomm for anticompetitive practices, alleging that its “no license, no chips” policy—which forced device manufacturers to license its patents at allegedly unfair rates as a condition for purchasing its chips—constituted anticompetitive behavior.¹⁶⁵ A district court ruled against Qualcomm, finding its practice to be anticompetitive, although the decision was later reversed by the Ninth Circuit Court of Appeals.¹⁶⁶

NXP also had a strong presence in the communication chip market, offering products such as 5G connected–communication infrastructure and radio frequency (“RF”) components for wireless and wired networking.¹⁶⁷ Its portfolio included proprietary technologies in mobile payments and Vehicle-to-Everything (“V2X”) communication, areas of significant growth potential.¹⁶⁸ The merger raised concerns that Qualcomm could exploit its aggressive royalty-based business model to extend its dominance into these markets, potentially leading to increased market concentration and anticompetitive practices in sectors like mobile payment solutions and automotive communication technologies.

The deal was approved without a second request—the process by which agencies request additional information when a transaction raises potential anticompetitive concerns—by the FTC on April 27, 2018.¹⁶⁹ Although the FTC did not provide an official explanation, it is likely that the agency determined that the market efficiencies resulting from the merger outweighed any concerns about market concentration. As discussed, Qualcomm and NXP had complementary strengths in different sectors of the semiconductor market. Qualcomm excelled in wireless communication technologies, particularly 3G, 4G/LTE, and emerging 5G, and dominated the market for mobile processors and modem chips, which are critical for smartphones and other wireless devices.¹⁷⁰ Its revenue primarily depended on licensing royalties from its extensive SEPs portfolio and selling chips for mobile devices.¹⁷¹ In contrast, NXP was a leader in automotive semiconductors, IoT communication chips, and secure connectivity solutions.¹⁷² Its significant markets included V2X technologies, embedded secure elements, and industrial IoT applications.¹⁷³ NXP’s revenue was largely derived from automotive and IoT applications rather than mobile processors or modems.¹⁷⁴ These differences resulted in Qualcomm and NXP serving distinct client bases: Qualcomm primarily catered to smartphone manufacturers while NXP served industrial IoT developers and secure payment providers. Even within the communication chips market, in which their operations potentially overlapped, Qualcomm focused on modem technologies for mobile networks and relied heavily on patent licensing, while NXP specialized in localized communication solutions like near-field communication (“NFC”), Bluetooth, and automotive-specific communication, earning revenue through chip manufacturing. Given their distinct verticals, a detailed Herfindahl-Hirschman Index analysis would likely indicate minimal market overlap.

Figure 2. Qualcomm’s Total Revenue vs. Licensing Revenue, 2016–2020

Figure 3. NXP’s Revenue Breakdown, Q3 2023–Q3 2024

The merger was expected to enhance market efficiency and drive innovation by combining Qualcomm’s expertise in wireless communication technology with NXP’s capabilities in V2X technology and IoT chip manufacturing.¹⁷⁵ This synergy had the potential to create secure, high-performance IoT devices and seamless vehicle communication systems, enabling smart home and vehicle solutions. Additionally, the merger would allow both companies to streamline supply chains, optimize manufacturing and distribution networks, and reduce dependency on any single supplier. These efficiencies were anticipated to improve the companies’ financial health, lower production costs, and ultimately benefit customers.¹⁷⁶ As for the concern that Qualcomm might extend its aggressive licensing model to NXP’s standard essential patents, empirical studies suggested that Qualcomm’s licensing practices did not result in excessive consumer costs.¹⁷⁷ On the contrary, consumers enjoyed rapid technological advancements and decreasing adjusted prices for wireless communication devices.¹⁷⁸ Hence, even if Qualcomm had extended its model to NXP’s SEPs, it would not have raised any anticompetitive concerns.

The EU’s regulators identified competition concerns related to Qualcomm’s baseband chipsets and NXP’s NFC and secure element (“SE”) chips, MIFARE technology (a proprietary, contactless smart card technology widely used in transit and access control systems), and NFC patents.¹⁷⁹ To address these concerns, Qualcomm agreed to several behavioral remedies, including licensing NXP’s MIFARE technology on favorable terms for eight years, ensuring interoperability between Qualcomm’s chipsets and rival NFC and SE products, refraining from acquiring NXP’s standard essential NFC patents and certain nonstandard patents, transferring them to a third party for royalty-free licensing, and granting royalty-free licenses for retained nonstandard NFC patents.¹⁸⁰ After imposing these remedies, the European Commission concluded that the competition concerns were adequately addressed and approved the deal.¹⁸¹ Six other jurisdictions also approved the deal.¹⁸²

The deal, however, faced significant resistance from Chinese regulators.¹⁸³ MOFCOM, China’s merger review authority at the time, expressed unspecified antitrust concerns regarding the deal.¹⁸⁴ In an effort to address these concerns, Qualcomm withdrew and refiled its acquisition notice in April 2018 at MOFCOM’s request, hoping to reach a last-minute resolution to secure approval before the deadline set by the parties.¹⁸⁵ The review process stretched over twenty months, effectively blocking the merger.¹⁸⁶ In a statement issued on July 27, 2018, SAMR, which had taken over antitrust responsibilities from MOFCOM earlier that year, noted that Qualcomm’s proposed remedies had not sufficiently addressed its competition concerns and expressed regret that the deal had been terminated.¹⁸⁷

The Chinese authority’s decision to delay approval of the Qualcomm–NXP merger, effectively blocking the transaction, was widely perceived—including by Qualcomm’s then-CEO Steve Mollenkopf and U.S. Treasury Secretary Steve Mnuchin—as collateral damage in the U.S.-China trade war initiated by the Trump administration.¹⁸⁸ Although SAMR stated that its actions were based solely on antitrust concerns, the European Commission’s decision potentially showed that any potential competition issues raised by the merger appeared resolvable through remedies.¹⁸⁹ Public reports also indicated that Qualcomm was open to accepting behavioral remedies to address SAMR’s concerns.¹⁹⁰ However, after the Trump administration threatened to impose significant tariffs on Chinese products in early-July 2018, the review of the Qualcomm–NXP merger stalled and ultimately went unresolved.¹⁹¹ In December 2018, after meeting with Xi at the G20 Summit in Buenos Aires, Trump told reporters that Xi had expressed a willingness to reconsider China’s decision to withhold approval of the merger.¹⁹² Although China’s official statements did not confirm Xi’s willingness to revisit the deal¹⁹³—and even if he had instructed SAMR to approve it, it was too late as the deal had already been terminated¹⁹⁴—the timing and context lend further credence to the view that the stalled review was not, at least, purely antitrust driven but a retaliation for the broader U.S.-China trade hostilities.

More importantly, perhaps, this deal also marked a significant change in China’s merger control practice, at least in the semiconductor field. Prior to this, China had generally followed the lead of other major antitrust regulators, particularly the EU, in the merger review process.¹⁹⁵ Where the EU and United States antitrust regulators have imposed remedies, China has often imposed similar remedies, although the remedies might be uniquely designed specifically for the Chinese market.¹⁹⁶ This divergence suggests a shift in China’s approach to merger reviews, potentially influenced by broader geopolitical tensions rather than purely economic or competition-based considerations.

B. SK Hynix’s Acquisition of Intel’s NAND Memory Chip Business

In October 2020, SK Hynix, one of the largest chip producers in South Korea, announced its acquisition of Intel’s NAND memory and storage business, including a manufacturing plant in Dalian, China, to bolster its NAND flash solutions’ competitiveness.¹⁹⁷ The deal positioned SK Hynix as the second-largest NAND memory producer globally, behind only Samsung.¹⁹⁸ Several competition authorities reviewed the transaction, granting unconditional approval, including those in the United States, the EU, the United Kingdom (“UK”), South Korea, Taiwan, Singapore, and Brazil.¹⁹⁹

The FTC approved the SK Hynix–Intel merger without issuing a second request or commenting on its decision.²⁰⁰ The primary concentration concern likely stemmed from the small number of major players in the NAND memory chip market, which was dominated by Samsung, Kioxia, Western Digital, Intel, SK Hynix, Micron, and YMTC.²⁰¹ Together, Samsung, SK Hynix, and Micron accounted for roughly 67% of global NAND revenue.²⁰² By acquiring Intel’s NAND business, SK Hynix could potentially have consolidated the market further, raising concerns about increased concentration and reduced competition. However, despite their significant presence in the NAND market, Intel and SK Hynix had complementary product focuses and client bases. Intel specialized in high-performance SSDs for enterprise and data center markets²⁰³ while SK Hynix had strengths in DRAM and consumer NAND products.²⁰⁴ This complementarity suggested that the merger could promote innovation by combining Intel’s NAND technology with SK Hynix’s DRAM expertise, enabling the development of better hybrid memory solutions and mitigating anticompetitive concerns. The merger also allowed SK Hynix to leverage Intel’s Dalian facility, improving its supply network and expanding production capacity to meet growing global demand for NAND products. Most importantly, even after the merger, SK Hynix’s combined market share with Intel’s NAND business would remain significantly lower than that of Samsung, the market leader.²⁰⁵ This substantially alleviated concentration concerns and, in fact, suggested that the merger could enhance competition by increasing pressure on the dominant market leader.

These points were supported by the UK’s Competition and Markets Authority, which provided insight into why it found the deal unproblematic. It reasoned that the global NAND and SSD markets were highly competitive, and customers were “constantly demanding lower prices with larger memory.”²⁰⁶ The deal would increase SK Hynix’s share to about 22.1% for NAND²⁰⁷ and to about 37% for SSDs,²⁰⁸ while Samsung, the largest producer, still held approximately 36.9% of the NAND flash memory market as of the second quarter of 2024.²⁰⁹ Such an increase in concentration within a highly competitive market with multiple producers typically does not raise significant concerns among competition authorities. Such transactions could enhance market competitiveness by enabling companies like SK Hynix “to invest in innovation and compete more aggressively.”²¹⁰

Chinese regulators took a different stance as SAMR served as the final antitrust hurdle for the deal.²¹¹ After a year-long review, SAMR approved the transaction but imposed a series of behavioral conditions to address competition concerns and ensure supply security, meaning that the merger could not undermine a stable, reliable, and uninterrupted supply of NAND memory products to the Chinese consumers.²¹² SK Hynix was required to continue to supply all products in China on fair, reasonable, and nondiscriminatory (“FRAND”) terms and to increase its output of peripheral component interconnect express and serial advanced technology attachment enterprise-class solid-state drive products.²¹³ Additionally, SAMR noted the high market–entry barriers in these markets, stating that enterprise-class SSDs are primarily used in data center servers, in which customers demand exceptional product quality and stability.²¹⁴ New entrants face significant financial and customer-recognition challenges.²¹⁵ To address these barriers, SK Hynix was asked to facilitate entry of an unnamed local third-party competitor into relevant markets.²¹⁶

Although SAMR’s concerns regarding supply security and high-entry barriers were reasonable, the “market entry assistance” remedy imposed lacked a clear justification. If the concern was eliminating a competitor in the market, which was brought up a few times in the decision,²¹⁷ mandatory licensing agreements on FRAND terms would have been a more logical approach. Such agreements would provide local firms with access to critical technologies, thereby lowering entry barriers. However, the decision does not explain why the market-entry assistance remedy was chosen or clarify the circumstances under which such a remedy would be appropriate.²¹⁸ The language of the remedy as it is written is equally vague. The term assistance has not been defined and, thus, can potentially encompass not only financial support or loans, but also the transfer or licensing of intellectual property rights, such as patents, trademarks, and trade secrets. Likewise, entry could mean a one-time action, like patent licensing, or a sustained effort, like assisting in building production capacity.

Many commentators rightfully considered the remedy radical because it effectively opened the doors for Chinese competitors, including potential national champions such as YMTC, to penetrate the market.²¹⁹ They argued that this is another example of China using its “so-called antitrust measures to bolster its domestic technological ecosystem.”²²⁰ They went on to argue that the Committee on Foreign Investment in the United States (“CFIUS”), which reviews foreign acquisitions to assess their impact on U.S. national security, should have reconsidered its initial decision not to intervene.²²¹ Given that SAMR’s remedies were undisclosed at the time, and that the deal involved the transfer of sensitive U.S.–based intellectual property to a foreign firm, commentators suggested that CFIUS should further scrutinize the transaction.²²² “China plays both offense and defense in its regulatory reviews where the U.S. tends just to play defense,” they wrote, “the U.S. approach to antitrust only undermines its major tech players.”²²³

C. Intel’s Acquisition of Tower Semiconductor

Facing increasingly stiff competition in its traditional markets for personal computer (“PC”) and server processors in recent decades, Intel announced its Integrated Device Manufacturer 2.0 strategy in 2021.²²⁴ The strategy focuses on three goals: (1) expanding manufacturing with cutting-edge technology; (2) utilizing third-party semiconductor manufacturing facilities, also known as foundries, for internal needs; and (3) becoming a top-tier foundry, aiming for the second spot globally by 2030.²²⁵ As part of this strategy to shift Intel into the third-party foundry market, it announced in February 2022 its agreement to acquire Tower Semiconductor, a successful analog semiconductor foundry known for securing custom chip contracts, for $53 per share in cash, valuing the deal at $5.4 billion.²²⁶ With this acquisition, Intel sought to integrate Tower’s specialty technologies, including radio frequency, power, and silicon germanium, along with its client base, to enhance its less advanced foundry services and expand into lucrative markets such as the automotive sector.²²⁷

The transaction was swiftly approved unconditionally by regulators from multiple jurisdictions, including the United States, as antitrust concerns appeared minimal²²⁸—unsurprisingly so, given that the global foundry industry is highly competitive and driven by ever-increasing demand.²²⁹ In the third quarter of 2023, the top 10 foundries collectively reported revenues of approximately $28.29 billion, a 7.9% increase from the previous quarter.²³⁰ TSMC dominated the market with a 58% share, followed by Samsung at a distant second with 11.7%.²³¹ In contrast, Intel Foundry Service and Tower held much smaller shares, at 1% and 1.2%, respectively.²³² While domestic market shares in each jurisdiction may differ slightly from global figures, the small scale and limited scope of this transaction relative to the robust market and intense competition made it unlikely to raise concentration concerns. Moreover, there was minimal overlap between the core markets of Intel Foundry Service and Tower. As noted above, Intel’s traditional market was in PC and server processors. As it attempted to enter the third-party foundry market, it focused primarily on advanced logic-chip manufacturing and general-purpose foundry services.²³³

Tower, on the other hand, was a well-established foundry that specialized in analog chips, catering to industries such as automotive, medical devices, industrial equipment, and IoT.²³⁴ Tower’s emphasis on mature technology nodes and specialty applications—such as RF, power management, and silicon photonics—contrasted with Intel’s focus on cutting-edge technologies.²³⁵ Therefore, it was unlikely that the transaction would lessen competition in any single market. On the contrary, the acquisition of Tower would complement Intel Foundry Service by enabling Intel to diversify its offerings, particularly in analog chips, and better compete with dominant players like Samsung and TSMC. Regulators in most jurisdictions likely recognized these factors, viewing the transaction as a move that would enhance global competition in the foundry market, particularly in mature and specialty nodes, rather than stifling it.

However, SAMR dragged its feet in the approval process.²³⁶ After six weeks of review, SAMR invoked the “stop-the-clock” mechanism introduced under the amended AML to pause its review and discuss unspecified “regulatory concerns” with the parties.²³⁷ The delay persisted for months, effectively derailing the transaction.²³⁸ In August 2023, Intel announced it had “mutually agreed” with Tower to terminate the planned merger after failing to secure a ruling from SAMR before the deadline stipulated in the merger agreement.²³⁹ SAMR did not issue any public statements explaining its delay or detailing its regulatory concerns. Intel did not elaborate on its discussion with the Chinese regulators besides stating that its termination of the deal was “due to the inability to obtain in a timely manner the regulatory approvals required under the merger agreement.”²⁴⁰ Intel’s reticence is understandable given its substantial presence in China, where it employs over 12,000 people and generates more than $17 billion in revenue, accounting for approximately 27% of its global total.²⁴¹ Any statements that deviated from the CCP’s expectations could have exposed the company to significant retaliatory actions.²⁴²

Many commentators speculate that SAMR’s decision to delay approval of the Intel–Tower Semiconductor merger was another instance of China leveraging its antitrust review process to advance national policy objectives.²⁴³ Economically, SAMR’s stance is difficult to justify. As noted, Intel and Tower were complementary in their assets and similar mergers involving larger chipmakers—such as Intel’s $16.7 billion buyout of Altera,²⁴⁴ Avago Technologies’ $37 billion purchase of Broadcom,²⁴⁵ and an $11.8 billion takeover of Freescale Semiconductor by NXP²⁴⁶—had previously been approved by Chinese regulators with little resistance.

However, the deal occurred amidst escalating U.S.-China tensions, particularly in the semiconductor sector.²⁴⁷ Earlier that year, the Biden administration secured agreements with Japan and the Netherlands to join sweeping export controls introduced in October 2022, restricting China’s access to advanced semiconductor manufacturing equipment and technology.²⁴⁸ Just a week before Intel announced the abandonment of the merger, President Biden signed an executive order limiting U.S. investment in critical sectors in China, including semiconductors, microelectronics, quantum information technologies, and AI.²⁴⁹

Given this context, it is highly likely that Chinese regulators targeted Intel, a prominent American chipmaker, as a countermeasure in the ongoing trade and technology conflict. This aligns with other transactions analyzed above, showing a broader pattern of China using merger review in recent years to advance its economic and political interests.

D. General Trend in Chinese Merger Review Enforcements Under the AML

On the surface, Chinese merger reviews under the AML appear to be trending toward greater efficiency and standardization. Between 2008, when the AML was enacted, and the first quarter of 2018, when AML enforcement agencies were consolidated, a total of 2,151 merger filings were made.²⁵⁰ Of these, 2,052 were approved unconditionally, 36 were approved with conditions, and only 2 were rejected outright.²⁵¹ Over the years, the number of merger reviews completed steadily increased, from 80 in 2009 to 337 in 2017.²⁵² International transactions accounted for the vast majority of these cases, with 80–90% involving at least one international party.²⁵³ The Chinese authorities also seemed to be handling the increased caseloads with great efficiency, especially after the introduction of the simplified procedure in 2014.²⁵⁴ By May 23, 2018, 750 cases had been filed under this procedure, reducing clearance times to approximately one month after acceptance.²⁵⁵ This trend has continued post-consolidation. As noted above, in 2023, SAMR closed 797 merger review cases, with 782 (approximately 98%) receiving unconditional approval, 4 receiving conditional clearance, and 11 being withdrawn by the filing parties after case acceptance.²⁵⁶ Approximately 90% of cases were reviewed under the simplified procedure, and the average time to close a case was just over three weeks.²⁵⁷

Beneath the façade of increased sophistication in the body of law and the growing volume of enforcement actions lies a persistent lack of transparency in AML enforcement. Unlike in the United States, where merger review agencies routinely publish detailed decisions and analyses, Chinese regulators issue sparse and often generalized public statements.²⁵⁸ This opacity is further exacerbated by China’s weak judicial system, which heavily defers to government organs in their respective domains.²⁵⁹ As a result, there are often no clear, publicly available criteria or established precedents for assessing mergers or antitrust violations. The AML, like many other bodies of law in China, still operates in the dual political-legal system mentioned above.

By analyzing the cases above and comparing the actions taken by SAMR with the U.S. actors, this Note finds that the AML operates within the dual political-legal system described earlier, specifically in the merger review enforcements in the semiconductor industry. While the majority of merger cases might be reviewed with high efficiency and standardization under the AML, cases in sensitive industries—such as semiconductors—that affect the CCP’s mercantilist economic policies or involve companies from nations with strained diplomatic relations are consistently handled outside the formal legal framework. These transactions are subjected to lengthy delays or onerous conditions, not solely based on antitrust considerations but to advance the broader interests of the party-state.

These analyses of SAMR’s merger review actions in the semiconductor industry align with broader patterns observed in how the AML has been applied by Chinese authorities. A 2014 study examined 7,275 cross-border acquisitions reviewed by Chinese regulators between 1985 and 2010.²⁶⁰ The study found that industries deemed critical to national security—such as telecommunications, energy, biotechnology, aviation, and other high-tech sectors—faced significantly stricter scrutiny, resulting in lower approval rates for foreign acquisitions compared with nonstrategic industries.²⁶¹ Conversely, industries considered nonsensitive, such as consumer goods, had much higher approval rates.²⁶² The study also revealed that acquisitions involving SOEs, which are often regarded as having greater national security significance due to their status as national assets, were less likely to be approved.²⁶³ Furthermore, acquisitions by foreign companies from countries with strained diplomatic relationships, such as Japan and the United States, had lower odds of approval compared with average transactions.²⁶⁴

SAMR’s selective handling of sensitive cases—particularly in the semiconductor industry—to advance the party-state’s mercantilist interests undermines the fundamental principles of antitrust enforcement and the purpose of the merger review process itself. Extensive antitrust literature underscores the importance of transparency as a cornerstone of a robust competition law regime.²⁶⁵ A transparent merger review process requires public access to administrative or judicial decisions, especially in cases in which transactions are denied, delayed significantly, or subjected to special conditions.²⁶⁶ These decisions must include detailed reasoning, and the discretion exercised by agencies should be testable and publicly defined.²⁶⁷ Using merger reviews to further mercantilist objectives stifles competition. Behavioral remedies driven by mercantilism, such as the mandatory market entry assistance, disproportionately favor large domestic players—often SOEs—while raising entry barriers for other local competitors.²⁶⁸ Similarly, challenging complementary mergers due to geopolitical concerns not only reduces global competition but also harms consumers by diminishing market efficiency and innovation.²⁶⁹

The implications of these practices for foreign companies, particularly in the semiconductor industry, remain uncertain. China’s vast market makes it unlikely, at least in the short term, for foreign companies to bypass the SAMR review process, given the risk of being barred from the world’s largest market. However, the lack of transparency and resulting opaque and unequal application of the law fosters favoritism and unfairness, making it easier for competition laws to protect competitors rather than competition itself.²⁷⁰ In the long run, this unpredictability risks stifling innovation, discouraging foreign investment, and hampering market growth. To address these concerns, Chinese regulators should focus on reforms that enhance transparency. These reforms should include publishing detailed and consistent decisions, establishing clear and publicly accessible merger review criteria, and ensuring equal treatment of domestic and foreign entities. Additionally, strengthening judicial oversight and fostering collaboration with global antitrust authorities would enhance the credibility, fairness, and predictability of China’s merger review process, ultimately benefiting both domestic and international markets.

IV. THE Future of Semiconductor Merger Reviews Under THE AML: Fighting a Limited War

As discussed above, for China to foster a competitive and innovative market in the long term, it must build a stronger antitrust regime under the AML by enhancing transparency, establishing clear and consistent merger review criteria, and strengthening judicial oversight. However, both external and internal factors make immediate reform highly unlikely. On the external front, Trump, recently inaugurated for his second term, has continued his aggressive stance against China, imposing hefty tariffs on Chinese products.²⁷¹ Internally, China’s leadership has doubled down on its industrial policy goals and economic self-sufficiency, particularly in high-tech industries.²⁷² One might reasonably wonder how the AML will be applied in future merger cases, particularly in the semiconductor industry and other sectors deemed critical to state interests. This Part seeks to answer this question.

Existing literature argues that China’s mercantilist AML enforcement has largely focused on its use as a reactive tool deployed in response to foreign pressures.²⁷³ From a folk-theorem perspective in game theory, China employs the AML as part of a “tit-for-tat” strategy, retaliating against Western sanctions—particularly those imposed by the United States—on Chinese technology firms or other acts perceived as geopolitical aggression.²⁷⁴ In a theoretically perfect scenario, this tit-for-tat dynamic should lead to an equilibrium, in which both sides recognize that mutual cooperation is the optimal strategy.²⁷⁵ However, in practice, Western leaders often take aggressive actions against China for short-term political or economic gains, prompting China to retaliate by imposing costs on adversaries and reinforcing the credibility of its threats.²⁷⁶ Hence, China is constantly compelled to deploy the AML as a retaliatory tool to deter future acts of aggression from foreign adversaries.²⁷⁷

The cases analyzed in this Note, especially SAMR’s actions in SK Hynix’s acquisition of Intel’s NAND memory chip business, suggest that China’s mercantilist use of the merger review process under the AML has evolved beyond mere retaliation and into a more proactive industrial policy tool. Under the reactive framework, AML enforcement functions primarily as a deterrent, requiring a clear link between foreign aggression and China’s countermeasures.²⁷⁸ This ensures that adversaries understand AML enforcement as a direct response to their actions. At the same time, when deploying the AML under the dual system, SAMR must carefully maintain opacity to avoid alarming global markets, discouraging foreign investment, or triggering capital flight. This balancing act results in a tactical approach, in which SAMR times its retaliatory antitrust decisions to closely follow foreign “aggressions”—sending a clear signal to geopolitical actors while maintaining plausible deniability in the economic and legal spheres.

However, SAMR’s actions in SK Hynix’s acquisition of Intel’s NAND memory business diverge from this pattern. Unlike past cases, this transaction lacked a clear act of hostility from foreign adversaries, yet SAMR still imposed behavioral remedies requiring SK Hynix to facilitate the entry of a local competitor into the market.²⁷⁹ It remains unclear why and how China chose to strike first. One possible explanation is that SK Hynix, being a South Korean company, was viewed as a lower-risk target for regulatory intervention.²⁸⁰ China may have calculated that South Korea, lacking the geopolitical weight of the United States or the EU, would be less likely to retaliate or escalate trade tensions in response to SAMR’s intervention.²⁸¹ But regardless of motivation, this case demonstrates that China’s use of AML enforcement is not purely reactive. Instead, SAMR will also deploy proactive industrial policy measures aimed at strengthening China’s domestic semiconductor industry.

This evolution may indicate a limited expansion of China’s mercantilist approach to AML merger reviews within its dual legal system. While most merger cases will continue to be handled with efficiency and standardization,²⁸² and selective cases will still be used for geopolitical retaliation following foreign aggression,²⁸³ proactive interventions aimed at strengthening key domestic industries may become more frequent. This trend will likely be particularly pronounced when the merging parties come from countries that China perceives as lacking geopolitical influence. By selectively targeting foreign firms from smaller economies, China can impose industrial, policy-driven merger conditions with minimal risk of diplomatic or economic retaliation.

In summary, while SAMR’s mercantilist use of AML merger reviews remains economically constrained, its increasing willingness to intervene in transactions absent any clear foreign provocation suggests that China’s antitrust enforcement is becoming more deeply intertwined with its broader economic and industrial strategy. Multinational corporations, particularly those in sensitive industries like semiconductors or from countries with less geopolitical influence, must navigate AML merger reviews with heightened caution.

Conclusion

SAMR’s merger review decisions in the semiconductor industry illustrate China’s application of the AML within a dual legal system. While the AML ostensibly aims to prevent anticompetitive behavior and protect market efficiency, transactions in this sensitive sector are often reviewed outside the traditional legal framework, shaped by mercantilist policies advancing China’s national economic interests. This uneven application stems from China’s unique political-legal structure, in which a weak judiciary defers to administrative agencies like SAMR, which ultimately operate under party-state control. Within this dual system, SAMR must balance China’s need to adhere to global antitrust norms—ensuring competitiveness, consumer protection, and market efficiency—with its political mandate to prioritize state interests in strategic industries.

However, this opaque and selective enforcement of antitrust law risks undermining the credibility of China’s competition regime. Favoritism and political interference may stifle innovation, deter foreign investment, and hinder market growth. While reforms—such as enhancing transparency, establishing clear merger review criteria, and strengthening judicial oversight—would create a more predictable and robust antitrust framework, they are unlikely. China is doubling down on industrial policy and economic self-sufficiency in high-tech sectors, a trend further reinforced by escalating tensions with the new Trump administration. Consequently, China’s mercantilist approach to AML merger reviews will likely persist as a limited but strategic tool, both to retaliate against perceived foreign aggression and to promote domestic industrial policy goals.

99 S. Cal. L. Rev. 989

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Ian Wang*

* Articles Editor, Southern California Law Review, Volume 99; J.D. Candidate 2026, University of Southern California Gould School of Law; M.A. 2023, John Jay College of Criminal Justice; B.A. 2020, University of Michigan. I am grateful to Professor Jonathan Barnett and Professor Angela Zhang for their invaluable guidance. I also thank Rachel Liang, Yoann Huang, Kevin Zhang, and the rest of the staff of the Southern California Law Review for their thoughtful comments and dedicated edits in bringing this Note to publication.

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A Dual Approach to Competition: China’s Selective Mercantilist Application of Antitrust in Semiconductor Mergers