Qualcomm’s Business Is Apparently Hit By Trade War

Qualcomm is amongst those companies that have been caught up in the trade wars initiated by United States president Donald Trump.

In case the San Diego-based chipmaker is unable to get approvals from the Chinese authorities this week for its $44 billion acquisition of the Netherlands’ NXP Semiconductors, that deal would have to be abandoned. While the US and China were locked in a trade spat, the Chinese authorities had held up the approval or the deal for months even though the deal was first announced by the companies over 20 months ago.

While it is possible that a last-minute approval to the deal is given by China, the situation is however very uncertain.

“If I were to lean one way or the other, I would lean toward no deal,” said Susquehanna International Group analyst Christopher Rolland, who tracks semiconductor companies.

A $2 billion termination fee would have to be paid by Qualcomm to NXP in case the deal doesn’t go through.

This is not the first time that the company has been caught up in the trade fights of the president.

Citing national security concerns, Broadcom’s $117 billion bid for Qualcomm was prevented by Trump in March. That was an exceptional move by the president. Currently, imposition of import tariffs on semiconductors that are imported from China is also being considered by the Trump administration. Member companies would be hurt by that, said a trade organization that represents Qualcomm.

Qualcomm’s recent struggles have been exacerbated by the trade war. Most of the revenues generated by the company come from its licensing business of smartphone radios and chips. But currently, two of the largest clients of the company – Apple and Huawei, are opposing Qualcomm on royalty payments. There are reports that for its new iPhones this year, Apple could even choose to use Intel chips instead of Qualcomm chips.

At the same time. regulatory scrutiny has bene faced by the company all over the world. antitrust violations resulted in a $12. Billion fines being imposed on Qualcomm by the European Union  in January and three year prior to that almost $1 billion of fine had been imposed on it in China on anti-trust issues.

“It’s just been one thing after another,” said Stacy Rasgon, a chip analyst at Bernstein.

Qualcomm had hoped that the acquisition of NXP would help it to expand into new businesses.

Qualcomm CEO Steve Mollenkopf had told The New York Times that the firm would not seek any extension for the completion of the deal beyond Wednesday when the company would be reporting earnings.

(Adapted from Money.CNN.com)


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