Qualcomm-NXP Merger Goes Down to Wire

A stalled merger that would see U.S. telecom chip giant Qualcomm buy Dutch peer NXP could become the biggest corporate victim to date of trade tensions between the U.S. and China, as a final deadline to close the deal approaches on Wednesday.

Qualcomm Inc. announced its plan to pay $44 billion for NXP Semiconductors NV back in October 2016, and the deal has now received the necessary antitrust clearance in all markets except for China. Beijing has expressed concerns about the deal and in April asked the two sides to resubmit their plan. But it has not given final approval or rejection of the deal, forcing the pair to extend their closing deadline numerous times. 

Observers and media reports have said Beijing may be dragging its feet to express displeasure at Washington’s aggressive trade tactics, since Qualcomm is a leading U.S. chipmaker. Those tactics have included the levying of protective tariffs on billions of dollars of Chinese imports, prompted by U.S. President Donald Trump’s complaints that Beijing engages in unfair trade tactics and doesn’t respect intellectual property rights. 

The latest deadline for closing the deal is set for July 25. Last week Qualcomm CEO Steve Mollenkopf told the New York Times there will be no further extensions beyond that date, which is also when the company is set to report its latest quarterly results. 

Beijing already has tense relations with Qualcomm, following an anti-trust probe into the company’s licensing practices that resulted in a record $975 million fine against the company in 2015. That previous tension, combined with the latest bigger trade tensions, may be factors behind Beijing’s apparent foot-dragging, said Christopher Balding, an economist and former professor at the HSBC Business School at Peking University Shenzhen.

“If they just let the clock run out and then blame Qualcomm, I think you’d have to say Qualcomm is a victim of the trade war,” he said. “But Beijing has had its own battles with Qualcomm before so at worst it is killing two birds with one stone for them, even if it isn’t primarily a trade war issue.”

Despite the apparent delays in the Qualcomm deal, Beijing has recently gone ahead and approved two other major microchip purchases involving American companies since the trade tension flared with Washington. One of those saw Beijing approve the sale of Toshiba Corp.’s chip unit to a U.S.-led consortium in May, while the other saw Microchip Technology Inc. cleared to purchase Microsemi Corp. 

Contact reporter Yang Ge (geyang@caixin.com)