Acquiring a Korean Technology Company: The National Core Technology Approval Process

Korea’s semiconductor, battery, display, shipbuilding, and biotech companies attract steady interest from foreign strategic buyers and investors. When the target holds technology the Korean government has designated as a “National Core Technology,” the deal needs government approval or prior notification under the Industrial Technology Protection Act, on top of merger control and foreign investment filings. The duty to file falls on the Korean target, not the foreign buyer. Missing it can lead to the deal being suspended or unwound, and to criminal exposure. This article explains how the regime works and how to plan for it.

1. Why Technology M&A in Korea Needs a Separate Regulatory Check

Korea protects strategically important technology through the Act on Prevention of Divulgence and Protection of Industrial Technology (the “Industrial Technology Protection Act”). The Act controls two things:

• the export of protected technology abroad, and
• foreign acquisitions, mergers, and joint ventures involving companies that hold that technology.

The rules are aimed at stopping technology from leaving Korea through corporate transactions, as well as through theft or unauthorized transfer. A foreign buyer can therefore be fully compliant on antitrust and foreign investment rules and still need a separate approval before closing.

2. What Counts as a National Core Technology

National Core Technologies are technologies that the government formally designates because they have high technological and economic value in Korea and abroad, and because their leak could seriously harm national security or the national economy.

• The designation is made and periodically updated by the Ministry of Trade, Industry and Energy (MOTIE).
• The current list covers more than 70 technologies across around a dozen fields, including semiconductors, displays, secondary batteries, shipbuilding, automobiles, steel, nuclear power, information and communications, space, biotechnology, robotics, hydrogen, and machinery.
• Designation is defined at a technical level of detail, such as specific process nodes, cell designs, or manufacturing processes. Not every company in these sectors holds a National Core Technology.

Determination procedure

A company that is unsure whether its technology falls within the list can apply to MOTIE for a formal determination. For a buyer, getting clarity on this early in diligence is one of the most valuable steps.

Key takeaway: The question is not whether the target is “in semiconductors” or “in batteries.” It is whether the target holds a specifically designated technology.

3. Approval or Notification: Which Applies

The Act distinguishes two regimes, depending on how the technology was developed.

Prior approval

If the National Core Technology was developed with government R&D funding (국가연구개발사업), the foreign acquisition requires MOTIE’s prior approval. Many Korean technology companies have taken part in government R&D projects at some point, so this regime applies more often than buyers expect.

Prior notification

If the technology was developed without government R&D funding, the target must notify MOTIE in advance. This is not a mere formality. If MOTIE finds that the transaction could seriously affect national security, it can, after deliberation by the Industrial Technology Protection Committee, order the transaction to be suspended, prohibited, or reversed.

The filing party is the target

In both regimes, the legal obligation sits with the Korean company holding the technology, not with the foreign buyer. The buyer depends on the target’s cooperation, and the transaction documents should reflect that.

4. Which Transactions Are Covered

The Act covers “foreign M&A and similar transactions”. The precise thresholds are set out in the Enforcement Decree. In general, the following are covered:

• Acquisition of shares that gives a foreign person control or significant influence over the target, such as a majority stake or the position of largest shareholder above a set threshold
• Mergers between the target and a foreign entity
• Acquisition of the business or key assets, including the technology itself
• Joint ventures between the target and a foreign person
• The right to appoint executives, or other arrangements giving a foreign person substantial influence over management

Indirect structures: An acquisition through a Korean vehicle controlled by a foreign investor may still be treated as a foreign acquisition. Using a Korean acquisition company does not by itself avoid the regime.

Minority investments: Smaller minority stakes generally fall outside the M&A provisions. But side agreements giving board seats, veto rights, or access to technology can bring a transaction within scope. Separately, any transfer of technology under the deal may require export approval (see Section 8).

5. Procedure and Timing

① Screening in due diligence

• Confirm whether the target holds a National Core Technology, using its own records, MOTIE determinations, and technical review.
• Confirm whether the technology was developed with government R&D funding.

② Filing by the target

• The target files an approval application or a prior notification with MOTIE, describing the transaction, the parties, the technology, and the protective measures.
• The buyer typically provides information about itself, its ownership, and its plans for the technology and personnel.

③ Review

• MOTIE reviews the filing, consulting relevant ministries and, for significant cases, the Industrial Technology Protection Committee.
• The statutory review periods are measured in weeks, typically around 45 days, but they can be extended, and requests for additional information can stop the clock. For sensitive transactions, allow several months.

④ Decision

• For approval cases, MOTIE approves or refuses the transaction.
• For notification cases, the transaction may proceed unless MOTIE intervenes on national security grounds.

Diligence screening → Target files approval application or notification → MOTIE and committee review → Decision → Closing

Mitigation commitments

Where concerns arise, commitments such as keeping R&D facilities and key engineers in Korea, limiting technology transfer to the foreign parent, and maintaining technology security measures can play an important role in the review. Prepare these before filing, not after objections are raised.

6. Consequences of Non-Compliance

• Government orders: If a transaction proceeds without the required approval or notification, MOTIE can order it to be suspended, prohibited, or reversed. Reversal after closing is extremely disruptive.
• Criminal liability: Carrying out a foreign acquisition without the required approval is a prohibited act under the Act and can lead to criminal penalties. Penalties for leaking National Core Technology abroad are among the most severe in Korean law, including mandatory minimum prison terms and large fines, and have been strengthened in recent amendments.
• Reputational and political risk: Technology protection is a high-profile policy issue in Korea. A transaction seen as bypassing the regime can attract public and political attention that affects later transactions.

7. Other Approvals That May Apply

The Industrial Technology Protection Act is one of several regimes a technology deal may need to clear:

• Foreign Investment Promotion Act: Foreign investment notification, and a national security review for investments that may threaten national security, including investments in companies holding sensitive technology. Foreign acquisitions of existing shares in defense industry companies require prior government permission. (See our earlier article on foreign investment recognition under the Act.)
• Merger control: A KFTC business combination filing may be required, depending on turnover and asset thresholds. (See our earlier article on merger filings in Korea.)
• Sector-specific limits: For example, foreign ownership limits for certain telecommunications businesses, and regulations in nuclear, aviation, and broadcasting.
• Technology export controls: Separate export approvals may apply for strategic items under Korea’s foreign trade laws.

8. Deal Planning Tips

Screen early

Raise the National Core Technology question in the first diligence request list, not after signing. If the target’s status is unclear, consider whether the target should seek a MOTIE determination before the deal timetable is fixed.

Allocate the filing in the contract

Because the target is the filing party, the share purchase agreement should include:

• regulatory clearance as a condition precedent to closing
• the target’s (and seller’s) obligation to file promptly and cooperate with information requests
• reasonable long-stop dates that reflect possible extensions of the review
• an allocation of mitigation commitments: which commitments the buyer will and will not accept

Plan post-closing integration with the export rules in mind

Approval for the acquisition does not authorize later technology transfers. Exporting a National Core Technology abroad, including by sharing designs, source code, or process know-how with the foreign parent, or moving R&D overseas, generally requires a separate export approval or notification. Integration plans should be built around this from the start.

Retain people and protect information

Korean authorities pay close attention to core engineers and technical data. Keeping teams in Korea and maintaining robust technology security systems helps both the review and post-closing compliance.

9. Conclusion

When a Korean target holds a National Core Technology, foreign acquisitions, mergers, and joint ventures need either MOTIE’s prior approval (for technology developed with government R&D funding) or prior notification (in other cases). The Korean target is the filing party, and failing to comply can lead to the deal being unwound and to criminal liability. The regime runs alongside merger control and foreign investment review, and continues after closing through technology export controls.

For foreign buyers, the practical message is clear: identify the issue in early diligence, write the filing obligations into the deal documents, and plan integration around Korea’s technology protection rules.