A number of media reports said that the Chinese side suggested that if the parties reach an agreement to promote the development of trade relations, then it may consider increasing the proportion of semiconductor chips purchased from US manufacturers, replacing the share of South Korean and Taiwanese manufacturers.
The purpose of this proposal is to reduce the trade deficit between China and the United States by replacing the purchaser. At present, this deficit has reached an all-time high of 375 billion U.S. dollars. China is the world's largest semiconductor consumer, and therefore China's trade is decided to trade. It has a huge impact on manufacturers.
The background of the negotiations is that Trump announced on Thursday that it will impose tariffs on about 60 billion U.S. dollars worth of Chinese goods, and that high-tech products will become a heavyweight. In response to the U.S.-announced steel and aluminum tariffs, China just announced its value on Friday. 3. The US$3 billion U.S. commodity taxation involves goods such as pork, apples and steel pipes.
The tax on steel pipes from the United States is to counter the US tax on Chinese steel, so why did pork and apples appear in the decision? The origin of these two commodities is precisely the key state of the US election. Iowa pork Production is leading the United States, and here is the first state in which the presidential nomination of the United States competes. The same is true of Apple’s case. The top ten US apple producing regions include Michigan, Pennsylvania, Virginia, and Ohio. Trump's reelection campaign is crucial.
This approach is smart, but it is too obvious. However, in complicated negotiations, there is an interesting card to play in China. This is Qualcomm's deal to acquire NXP Semiconductors. I have written many articles discussing Qualcomm and the company’s complexity. The strategic position of Qualcomm has always been to invest in high-growth markets other than smart phones, as the smart phone market has become saturated and there is limited room for future growth.
NXP is a market leader in hot areas such as automotive electronics, and the growth of these markets will bring great benefits to the acquirer. If you want to succeed in the future, especially after repulsing Broadcom’s hostile takeover, then Qualcomm Must buy NXP.
However, there is still a problem here. Qualcomm's acquisition of NXP has received regulatory approval from almost all countries, with the exception of China.
According to a Bloomberg report, the Chinese Ministry of Commerce, which is responsible for approving Qualcomm’s acquisition of NXP transactions, is facing tremendous pressure. They are required to strengthen the protection of domestic semiconductor manufacturers and even more aggressively directly reject the transaction.
In the past, there have been rumors that the Chinese government may make such a decision. As a result, Qualcomm has been forced to postpone the purchase price quotation until April 2 to suit the Chinese government’s timetable.
This situation is not without precedent. The Chinese government had previously directed against Qualcomm. In early 2015, Qualcomm reached an agreement with China's anti-monopoly regulator to impose an anti-monopoly investigation with a fine of 975 million U.S. dollars. At the same time, it lowered the patent fee standard for Chinese manufacturers. .
Patent revenue is one of Qualcomm’s key revenue sources. Considering that China is the world’s largest semiconductor market, this agreement shows that Qualcomm is facing challenges due to the Chinese government’s desire to protect the domestic semiconductor industry.
The Chinese government has made the development of a world-class semiconductor industry a priority for the country's development. It has invested over 10 billion U.S. dollars and has used various policy tools, including competition policies, to protect and nurture and develop the domestic chip industry.
If the acquisition of NXP’s deal fails, Qualcomm will face a major blow. This means that Qualcomm’s two-year preparations for this transaction will be lost, and the company will also be forced to rethink its future.
This also raises the question of how Qualcomm should develop in the future. After all, NXP is one of the few companies that can create value for Qualcomm shareholders. Even if there are other potential acquisition targets, the Chinese government can theoretically intervene in these. transaction.
In China, Qualcomm’s position in the negotiations is very unfavorable. Therefore, at the Qualcomm shareholders’ meeting last week, the support for Qualcomm’s board members was very low.
Qualcomm’s current CEO, Steve Mollenkopf, has not been able to obtain the support of most of the shareholders. Considering that Qualcomm’s board members usually support votes with an absolute majority, this situation is unusual.
Many shareholders voted against the board they had firmly supported in the past, protesting Qualcomm’s performance in dealing with Broadcom’s acquisitions, and other issues.
Purchasing more semiconductor chips from the United States and tapping on Qualcomm at the same time seems to be a one-two-bird approach for China. The total number of Chinese-imported semiconductor chips has not changed. Instead, Asian goods are replaced with American goods. At the same time, the decision to Qualcomm will hit the only company in the United States that can compete with Huawei in 5G mobile communications technology.
I estimate that the deal to acquire NXP will eventually be approved. Although China and the United States are still engaged in trade negotiations, the situation is very complicated, but at least China needs to demonstrate its stance of opening the door to doing business. At present, China’s trade behavior is becoming a focus of attention. However, this does not mean that Qualcomm will not make significant concessions. If this is the case, then it will have a further negative impact on the company’s revenue and its position in the Chinese market.
When Trump took office, he said that the United States should use more wisdom in the negotiations. When faced with Trump, how the Chinese government should deal with it deserves attention. China not only plays a good hand but can always take it away from other players. Good hand. So, the chips are slowly going to China.