The Fair Trade Commission (Chairman Han Ki-jung) has approved the merger between the world's leading telecommunications semiconductor FC HBA company and the world's leading server virtualization software company, with the condition that compatibility be prohibited from being used as a weapon to exclude competitors.

The Fair Trade Commission has imposed corrective action on the business combination between Broadcom Incorporated and VMware, Inc., in which the company acquires all of its shares (approximately $61 billion, or approximately 82 trillion won).

This merger is a hybrid merger between two different companies, namely, Broadcom, a hardware company headquartered in the United States that focuses on communications semiconductors, and VMware, a leading software company in the server virtualization market.

The Fair Trade Commission focused on whether, after the merger, VMware's server virtualization software would be compatible with Broadcom's hardware but not with other competitors' components, potentially excluding competitors.

From the initial stages of the review, we conducted a thorough review, cooperating closely with overseas competition authorities, including those in the EU, the US, the UK, and China, listening to opinions from various stakeholders at home and abroad, and receiving technical advice from relevant experts.

In particular, the market that the Fair Trade Commission has examined in depth is the FC HBA market, where Broadcom has a high market share (64.5%, as of 2022) among components that require direct interaction with server virtualization software. Currently, the only major manufacturers in the FC HBA market globally are Broadcom and Marvell, so this is an area where market monopolization is a concern.

An FC HBA is an adapter that is a component of a server and supports connections between the server and a storage network (SAN).

Specifically, the FTC noted that VMware has a de facto standard position in the server virtualization ecosystem, has complete discretion in certifying compatibility with component suppliers, and that compatibility certification is considered a necessity in the market.

The court ruled that VMware could use this position to employ strategies such as delaying and obstructing compatibility certification for Broadcom's competing components or rejecting compatibility certification requests from new vendors.

This would exclude Broadcom's only competitor, Marvell, from the market and make it difficult for new entrants to enter, further solidifying Broadcom's dominant position in the FC HBA market. As a result, it was predicted that product prices would rise in the FC HBA market, limiting buyer choice, reducing quality, and hindering innovation.

To prevent such harm, the Fair Trade Commission imposed corrective measures on Broadcom to ensure compatibility with competitors and new entrants for the next 10 years.

If you look closely, it contains the following: △Prohibition on lowering the compatibility level with competitors, etc. below the current level △Prohibition on lowering the compatibility level with competitors, etc. below the Broadcom level △Providing Broadcom FC HBA driver source code and license if requested by competitors, etc.

This corrective action is significant in that it prevents concerns that VMware, a leader in virtualization, a core technology in the cloud industry, may use its position to restrict competition in the global FC HBA market by hindering compatibility, and protects the openness and innovation environment of the related ecosystem.

In particular, it is significant in that it prevents direct and indirect damage (such as price increases) to domestic businesses that may arise in the process of manufacturing servers by purchasing FC HBAs from Broadcom or purchasing servers equipped with Broadcom FC HBAs.