Bundeskartellamt clears proposed merger between Applied Materials and Tokyo Electron

The Bundeskartellamt has cleared the proposed merger between Tokyo Electron Limited, Tokyo, Japan, and Applied Materials, Inc., Santa Clara, USA without conditions and obligations. The merger between the two manufacturers of equipment for the production of semiconductors is still under examination by the competition authorities in the USA, South Korea, Japan, Taiwan and China.

Andreas Mundt, President of the Bundeskartellamt: "This merger has an important international dimension as it involves the number one and number four of the world's leading suppliers of semiconductor production equipment. An in-depth analysis of the individual product markets affected showed that most of the products supplied by the parties to the merger complement each other. For this reason the analysis showed only a few overlaps. Furthermore, many of the worldwide markets affected are less economically important in Germany and have therefore not been considered in our examination. The project could thus ultimately be cleared."

The parties to the merger develop and produce equipment for the manufacture of semiconductors (chips). This includes many different and very sophisticated types of equipment, each of which covers a specific stage in the manufacture of semiconductors. If all the types of equipment produced are taken together, Applied Materials is the number one manufacturer in this sector and Tokyo Electron the number four.

In a one-year intensive investigation the Bundeskartellamt analysed whether the proposed merger of the two parties would have anticompetitive effects. Almost forty individual markets had to be examined in depth. The individual types of equipment only cover single stages of the semiconductor manufacturing process and are not in competition with products used in other stages of this process. Overlaps in the portfolios of the parties to the merger that are relevant in terms of competition can only be found in very few of the markets examined. The Bundeskartellamt therefore also examined whether the enlargement of the product portfolio would lead to a restriction of competition. However, this was not confirmed by the results of the investigations. As semiconductor production is a highly dynamic sector, the upstream level of semiconductor production equipment, i.e. the level affected in this case, also depends on constant technological change. The Bundeskartellamt also investigated the extent to which the proposed merger is likely to affect innovation markets. The results showed that competition in this sector would not be significantly impeded. One reason is that some of the customers for the equipment are large international companies with huge buyer power which means that in negotiations with these companies the parties to the merger cannot make full use of their strong market positions.

A special feature of German competition law is the so-called minor market (de minimis) clause. According to this clause a merger cannot be prohibited if the turnover achieved on the domestic market affected in the last calendar year was less than 15 million euros. Even though the merger primarily involves international markets, more than half of the markets examined are regarded from a German perspective as minor markets. For this reason the Bundeskartellamt was not authorised to address any possible competition problems on these markets by prohibiting the merger or clearing it subject to conditions and obligations.