[Exclusive] Qualcomm’s NXP Deal Dies on China’s Silent Treatment for 5G Lead

3 min readJul 26, 2018

[Exclusive] Qualcomm’s NXP Deal Dies on China’s Silent Treatment for 5G Lead

(Yicai Global) July 26 — Qualcomm’s USD44 billion plan to buy Dutch NXP Semiconductors has fallen through without China’s approval, which could hinder the US chipmaker’s progress in developing the fifth-generation wireless technologies to China’s benefit.

“The deal is over,” anonymous Qualcomm manager familiar with the deal told Yicai Global today, giving up about three hours before the permit deadline of 11:59 p.m. on July 25 New York time. The Chinese anti-trust regulator withheld from giving any decision on whether the chipmaker’s acquisition would breach anti-monopoly laws. This means that Qualcomm will have to pay the largest compensation fee of USD2 billion in the history of semiconductor mergers.

The State Administration for Market Regulation has kept only the parties involved in the case informed because of the classified nature of the documents, an official working for the regulator told Yicai Global.

China and the US are rivaling who gets to become the first in creating 5G technologies that could bring a new internet era with features such as connected cars and smart homes. Qualcomm and China’s Huawei Technologies are some of the R&D forerunners in the field.

Two other US-China tussles can offer light on why the union of Qualcomm and NXP was set back: first US President Donald Trump scuppered a USD105 billion bid by Singapore-based Broadcom to acquire Qualcomm in March, while citing national security concerns related to China. Broadcom is not owned by the Chinese so the remarks seemed baseless. After that, the US-China relations have soured further on the escalating trade dispute between the countries.

The M&A deal will not be restarted after it is aborted, said the Qualcomm executive, who asked to not be named, adding that the contractual conditions cannot be reversed once they are triggered.

Qualcomm Chief Executive Steve Mollenkopf said after a meeting yesterday that the California-based firm cannot extend the offer as it needs to provide certainty to its employees and shareholders. Next, the company will embark on a share buyback program worth up to USD30 billion to create value for shareholders. “We obviously got caught up in something that was above us,” Mollenkopf added.

China’s anti-monopoly regulator is the only one that has not said ‘yes’ so far after South Korea and the European Union gave consent in January following a series of commitments and concessions made by Qualcomm. In April, China’s Ministry of Commerce said it was reviewing the deal, now in its 19th month, and gave preliminary feedback.

Qualcomm’s [NASDAQ: QCOM] shares took the news in a stride and rose 0.97 percent to USD59.42 at the close yesterday.

Editor: Emmi Laine

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