In autumn 2016, Qualcomm, the mobile communications chip giant, made a $44 billion takeover bid for NXP Semiconductors of the Netherlands. Qualcomm wanted to end its relatively one-sided focus of its chip business on the smartphone market and put its business on a much broader footing by acquiring NXP. NXP Semiconductors offers a considerably larger product range, so that NXP chips can be found in a wide variety of applications. A particular strength of the Dutch lies in the automotive market, which results primarily from the acquisition of Freescale.
Qualcomm's desire to become a leading supplier in the automotive segment with an acquisition is understandable. In addition, the chip card business and the mobile phone chips fit together well. Perhaps more importantly, while Qualcomm has been at the forefront of technology in the wireless segment for years, it has done well to maintain its position. But the Californian company has recently been facing increased competition from major smartphone manufacturers. Today, Apple, Samsung, and Huawei's top devices are increasingly equipped with wireless processors from their own development and this trend is picking up speed.
For Qualcomm, this largest acquisition in the semiconductor industry to date would have been an interesting deal. It's just unfortunate that the Chinese antitrust authority SAMR let the deadline set by Qualcomm expire. The Handelsblatt reports that two days later SAMR announced that it still saw opportunities for the deal, but Qualcomm's plan had failed to address the competition concerns. The review period at the end of mid-August, however, could be extended to October 14th. In plain language, that means that the Chinese let Qualcomm "show up" again and thus unmistakably show who is the boss.
Eight out of nine competition authorities had already approved the takeover plans. Only the Chinese authority still had to approve.. Qualcommcan now take comfort in the fact that an end with horror is better than endless horror. Who knows what the SAMR would have said in the next iteration. NXP, in turn, can look forward to paying a $2 billion fee for not completing the acquisition. For Qualcomm's CEO Steve Mollenkopf, this is a severe blow. He had hoped until the last minute that the Chinese authorities would rubber-stamp the deal. Qualcomm became a pawn in the Sino-American trade dispute. Now it's about limitation of damage. The shareholders are now to be calmed down by a share buyback program worth 30 billion dollars. Does this save Mollenkopfs position?