One of the largest acquisitions of the year is under investigation, after the EU voiced concerns over Qualcomm’s $38bn purchase of NXP.
You go to all the trouble of putting $38bn on the table to buy a company, and then a major political bloc waves a ‘We’re concerned’ flag to halt the deal.
That’s what Qualcomm might be feeling right now, after its acquisition of NXP – a leader in the growing near-field communication (NFC) chip area – was officially brought under investigation by the EU’s antitrust regulators.
“We use our electronic devices every day – mobile phones or tablets,” said Margrethe Vestager, the commissioner in charge of competition policy in the EU.
“As semiconductors are used in practically every electronic device, we are dependent on them in those devices. With this investigation, we want to ensure that consumers will continue to benefit from secure and innovative products at competitive prices.”
These competitive prices that Vestager is concerned about could arise from the Qualcomm-NXP consolidation.
Qualcomm is one of the largest semiconductor makers in the world, supplying technology to many leading device manufacturers. It develops and supplies integrated circuits for smartphones and many other types of connected devices, and also licenses the rights to its intellectual property portfolio.
NXP’s business is also in this area, but with a bigger focus on NFC. This deal would combine two of the main players in the industry.
According to Reuters, Qualcomm is confident of satisfying any EU concerns, “and that it still expects to close the deal by the end of the year”. Indeed, US antitrust enforcers gave the green light for the deal in April without demanding concessions.
The EU Commission’s initial market investigation raised several issues relating in particular to semiconductors used in mobile devices, such as smartphones, and in the automotive industry.
It has noted three key areas to investigate:
- The merged entity would hold strong market positions within both baseband chipsets and NFC/SEs chips, and would have the ability and incentive to exclude their rival suppliers from these markets through practices such as bundling or tying.
- It 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 will investigate whether such conduct could lead to anticompetitive effects, such as increased royalties for customers and/or exclusion of competitors.
- It 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, which will play an important role in the future development of ‘connected cars’.