European Commission to Investigate Qualcomm-NXP DealFriday, June 9, 2017
The European Commission said June 9 that it will go forward with a detailed investigation into Qualcomm Inc.’s $38 billion bid for NXP Semiconductors N.V.
“The commission has concerns that the transaction could lead to higher prices, less choice and reduced innovation in the semiconductor industry,” it said in a statement.
NXP (Nasdaq: NXPI) is based in the Netherlands and acquired U.S.-based Freescale Semiconductor in 2015. Qualcomm (Nasdaq: QCOM) sees the addition of NXP — and its line of automobile semiconductors — as a way to diversify its income stream and ensure growth as profits from smartphone royalties and microchips flatten out.
Qualcomm issued a statement saying it expected a thorough review process, and that it expects the merger to be successful, closing by Dec. 31.
With the European Commission’s announcement, the clock begins ticking. The commission has 90 working days to complete its investigation, making the deadline Oct. 17.
In the end, the commission may choose to set conditions for its approval of the Qualcomm-NXP deal.
U.S. regulators have already OK’d the deal.
In a press release, European regulators expressed concerns that:
• The merged entity would hold strong market positions within baseband chipsets, near field communication (NFC) chips and secure element chips, and would have the ability and incentive to exclude rivals from the markets through practices such as bundling or tying.
• The merged entity would have the ability and incentive to modify NXP’s current intellectual property licensing practices, in particular in relation to NFC technology, including by bundling the acquired NFC intellectual property to Qualcomm’s patent portfolio. The commission said it will investigate whether such conduct could lead to anticompetitive effects, such as increased royalties for customers and/or exclusion of competitors.
• The merger would remove competition between companies active in the markets for semiconductors used in the automotive sector and, in particular, in the emerging vehicle-to-everything technology (abbreviated V2X), which will play an important role in the future development of connected cars.
The European Commission opened a separate antitrust investigation against Qualcomm in 2015.
Qualcomm issued a statement after the June 9 announcement.
“This acquisition is complementary, and driven by the belief that the combined efforts of the two companies will produce even greater innovation than they would alone,” Qualcomm said. “This significant investment by Qualcomm will help our industry partners in the automotive, [internet of things] and security sectors advance their digital transformation and further the digitization of industries worldwide.
“Qualcomm is confident that it can address the concerns raised by the European Commission and intends to continue working with the commission and other regulators to secure clearance. Qualcomm continues to expect this transaction to close by the end of 2017.”