Yageo Corporation files a merger report with the Fair Trade Commission regarding its acquisition of over 52% of the shares of Compostar Technology Co., Ltd.

Chinese Taipei

Case:

Yageo Corporation files a merger report with the Fair Trade Commission regarding its acquisition of over 52% of the shares of Compostar Technology Co., Ltd.

Key Words:

resistor, capacitor, acquisition

Reference:

Fair Trade Commission Decision of March 17, 2005 (the 697th Commissioners’ Meeting)

Industry:

Electronic Passive Devices Manufacturing (2720)

Relevant Laws:

Article 6 , Article 11 , and Article 12 of the Fair Trade Law

Summary:

1. In order to efficiently integrate the whole series of its multi-layer ceramic capacitance products with complete product combination of high, middle, and low capacitance and therefore to improve its services, Yageo Corporation (hereinafter referred to as “Yageo”) intends to acquire 52% to 68% of the shares of Compostar Technology Co., Ltd. (hereinafter referred to as “Compostar”) by share swap. Yageo therefore files a merger report with this Commission.
2. This case falls within the merger type provided for in Article 6 (1) (ii) of the Fair Trade Law “where an enterprise holds or acquires the shares or capital contributions of another enterprise to an extent of more than one-third of the total voting shares or total capital of such other enterprise.” Moreover, in accordance with Article 11 (1) (i), (ii), and (iii) of the Fair Trade Law, where “as a result of the merger the enterprise(s) will have one third of the market share,” “one of the enterprises in the merger has one fourth of the market share,” or “sales for the preceding fiscal year of one of the enterprises in the merger exceeds the threshold amount publicly announced by the central competent authority,” a report of the merger shall be filed with the central competent authority in advance. Based on the report, the market share of Yageo on the multi-layer ceramic capacitor market of Taiwan was 29.44% in 2003, while that of Compostar was 7.66%; and in 2003, the market share of Yageo on the domestic chip-resistor market was 37.67%, while that of Compostar was 3.27%. Such a situation falls within Article 11 (1) (i) and (ii) of the Fair Trade Law, and a report of the merger shall be accordingly filed with this Commission in advance. Furthermore, since the sales amount of Yageo in the fiscal year 2004 was around NT$ 109.3 hundred million (10,930,000,000) and that of Compostar in the same fiscal year was around NT$ 21.98 hundred million (21,980,000,000), the amount exceeds the threshold which provides that, “a non-financial institution’s sales amount of the previous fiscal year is over NT$ 10 billion (10,000,000,000) and the sales amount of the enterprise merged is over NT$ 1 billion (1,000,000,000).” Thus, a report of this merger case shall be filed with this Commission in accordance with Article 11 (1) (iii) of the Fair Trade Law.
3. The enterprises of the merger take the multi-layer ceramic capacitors and chip-resistors respectively as two individual markets. It is true that multi-layer ceramic capacitors are merely one type of capacitor products, and chip-resistors are also only one type of resistor products. However, capacitors and resistors should not be furthermore divided into sub–markets [for the purpose of merger control]. Therefore, the specific market range of this case shall be defined as the resistor market and the capacitor market for deliberation.
4. Presently, there are total 68 multi-layer ceramic capacitor manufacturers and 49 chip-resistor manufacturers in Chinese Taipei. There are many businesses in the markets competing with one and another. Therefore, this merger case has only limited impact on the domestic competing enterprises. Additionally, according to the 2004 yearbook of electronic part/assembly industries, the market share of Yageo on the domestic resistor market increased from 26% to 27.26% and its market share on the domestic capacitor market increased from 13% to 15.09% after the merger. Thus, the market shares of the enterprises of this merger on the resistor and capacitor markets did not have an obvious increment and had limited impact on the market structure. Additionally, the key patent of multi-layer ceramic capacitor products is held by Japanese companies. Domestic companies mainly manufacture multi-layer ceramic capacitors with low capacitance. However, the technology of this product is quite mature. Therefore, after the merger, no market entry barriers are created from linking the patent technologies. Furthermore, the production costs of multi-layer ceramic capacitors and chip-resistors can be effectively reduced after the merger. Also, through integrating the existing manufacturing factories and equipment of multi-layer ceramic capacitors and chip-resistors, the production efficiency can be elevated and innovation and R&D be carried out. The merger has positive economic benefits to the enterprises of the merger and to the entire economy. Therefore, it has positive influence on our overall economic benefits and no disadvantages from competition restraint. The overall economic benefits of the merger outweighs the disadvantages resulted from competition restraint. This Commission therefore, in accordance with Article 12 (1) of the Fair Trade Law, shall not prohibit the merger.
   

Summarized by Chen, Shu-Hua

Supervised by Liou, Chi-Jung

Appendix:

Yageo Corporation’s Uniform Invoice Number: 22636630
Compostar Technology Co., Ltd.’s Uniform Invoice Number: 16744843