San Diego Qualcomm Inc.’s footing in its most important market has gotten a little shakier lately as the Trump administration’s confrontation with China over intellectual property rights and national security threatens to disrupt two sets of negotiations vital to the company.
The San Diego wireless giant is trying to resolve a costly patent licensing dispute with an unnamed Chinese manufacturer widely thought to be telecomm heavyweight Huawei Technologies Co. Ltd.
If Huawei gets to pay Qualcomm smaller royalties, so might every other Chinese phone-maker.
At the same time, Qualcomm is still looking for a green light from the Chinese government on the company’s $44 billion bid for Dutch-owned NXP Semiconductors NV, a full year after U.S. regulators cleared the deal. Observers say Qualcomm may be forced to sell off assets in exchange for an antitrust decision allowing it dominance in auto electronics and a big boost in the internet of things.
The proceedings shouldn’t be related, as Huawei is ostensibly independent from the Chinese government. But some analysts assert the discussions probably are linked, and that as a result, the Trump administration’s economic protectionist moves are touchy for Qualcomm.
A connection between Trump’s tough trade policies, China’s NXP review and the Huawei licensing talks is “probably hanging together at least loosely,” said Stacy Rasgon, senior analyst for U.S. semiconductors at New York-based AllianceBernstein LP.
In a move viewed as helping to ease China’s concerns, NXP last week sold its stake in a Chinese chip-design joint venture. Reuters reported that, according to a stock exchange filing, NXP sold its 40 percent of Suzhou ASEN Semiconductors Co. Ltd., to Taiwanese venture partner Advanced Semiconductor Engineering Inc., for $127 million.
Tracing the Connections
“Things are all kind of intertwined here,” he said, adding the current cross-Pacific dynamic is “probably not a positive” and is at best neutral for Qualcomm.
Trump’s March 22 announcement of $60 billion in tariffs against China is not expected to target wireless components directly, nor is the $3 billion Chinese retaliation plan. Observers say there could be shared damage, though, because industry supply chains tend to be global and long.
The question is whether harm will come from a new chill in U.S.-Chinese trade relations. Impacts are already being felt in China: U.S. sales of Huawei products have been limited by cybersecurity warnings from top intelligence officials and political pressure on domestic wireless carriers and phone retailers.
China and Qualcomm still appear to need and want each other. Last month, it was reported the next in Huawei’s Mate cellphone line will feature Qualcomm’s fingerprint sensor technology. And in January the San Diego company signed deals worth $2 billion with four leading Chinese smartphone-makers, not including Huawei. That month, Qualcomm President Cristiano Amon said China would soon become the company’s top market.