Thursday Tech Briefing: Qualcomm, Baidu, Pinduoduo
BIG TECH COMPANIES
1. Qualcomm Calls Off $44 Billion Deal to Buy NXP
What: Qualcomm Inc. will terminate its $44 billion bid to buy Dutch peer NXP Semiconductors NV after failing to secure antitrust approval from China before the purchase’s Wednesday deadline.
Why it’s important: After nearly two years of waiting, the deal has failed to clear its last obstacle, after it was given the green light by regulators in all markets other than China. Qualcomm will now have to pay NXP a $2 billion breakup fee. The U.S. telecom giant said it would now pursue a stock repurchase program of as much as $30 billion, an increase from the $10 billion program announced in May.
Big Picture: The deal, which was to be the largest-ever merger in the semiconductor industry when announced in October 2016, is seen as the biggest victim of the trade conflict between China and the U.S. Observers and media reports suggested Beijing was dragging its feet on the transaction amid the rising trade tensions. (Source: Caixin)
2. Daimler and Baidu to Deepen Automated Driving Alliance
What: Daimler and Baidu have agreed to deepen their partnership through joint automated driving and connectivity projects. Daimler, the first foreign automaker to receive a road test license in China for highly automated driving research, is testing autonomous vehicles equipped with technology from Baidu’s Apollo platform. (Source: Daimler Press Release)
Why it’s important: Daimler was among the first companies to join Baidu’s Apollo open platform, which provides artificial intelligence and big data solutions for autonomous carmakers.
Baidu has been searching for a new direction for its artificial intelligence (AI) business, after AI pioneer Qi Lu stepped down as Baidu COO earlier this year. The company spun off its global business unit earlier in May, in order to focus on AI.
DEALS AND FUNDRAISING
3. Tsinghua Unigroup to Buy France’s Linxens for $2.6 Billion
What: State-owned Chinese chipmaker Tsinghua Unigroup has agreed to acquire French components-maker Linxens for roughly 2.2 billion euros ($2.6 billion), sources told Reuters. The deal, which has yet to be publicly announced, will require approval from French and German regulators.
Why it’s important: The news comes as Chinese investors increasingly favor Europe while turning away from U.S. assets, amid growing U.S.-China trade conflict. China has so far spent $45.5 billion on deals in Europe this year, double the amount invested in the same period a year ago, while its investments in the U.S. have dropped 75% to $1.9 billion.
Big Picture: Tsinghua’s acquisition of Linxens will be a test of European regulators’ attitude toward Chinese investment. Several of Tsinghua’s previous offshore investment plans were blocked by local regulators, with national security concerns increasingly becoming a major reason for acquisition failure in high-tech industries. (Source: Reuters)
4. Tencent-Backed Pinduoduo Prices IPO at Top of Range
What: Chinese group-buying site Pinduoduo will price its U.S. initial public offering (IPO) at $19 per American depositary receipt (ADR) to raise as much as $1.63 billion in one of the biggest flotations by a Chinese enterprise this year, a person close to the company told Caixin. The Pinduoduo flotation was oversubscribed 20-fold by investors including Fidelity Investments and the sovereign funds of Abu Dhabi, the source said.
Why it’s important: Pinduoduo, backed by social media giant Tencent Holdings, priced its IPO at the top of the $16-$19 range stated in its latest prospectus, released July 17. “The oversubscription would allow Pinduoduo to raise its IPO price by 20% to $22.80 per ADR, but the company founder Huang Zheng decided to price at $19,” the source said.
Big Picture: Three-year-old Pinduoduo is one of the fastest-growing companies in China’s thriving online shopping industry. It has also faced allegations that some of the products it sells are fakes or substandard, causing some market observers to worry about its reputation and financial sustainability. (Source: Caixin)
5. Xiaomi’s Growth Model Is Already Showing Cracks in India
What: Xiaomi is losing its grip on its second-largest market, India. Rivals Samsung has knocked it out of the top spot there, and other Chinese phone-makers are growing quickly.
Why it’s important: Xiaomi is failing to gain loyalty from customers willing to pay more for a smartphone. The numbers show that Xiaomi is becoming increasingly dependent on sales of budget phones, even though most of usurper Samsung’s sales are in a higher price range.
Big picture: The Chinese smartphone maker wants to convince investors that its future lies in its platform business, which only accounts for a very small part of its revenue at the moment. In order to prop up its platform strategy, Xiaomi must sell as many devices as possible, but “cheap doesn’t buy loyalty,” according to Bloomberg columnist Tim Culpan. (Source: Bloomberg)
Compiled by Qian Tong and Hou Qijiang
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