'All technical issues have been resolved,' said a person who understands Qualcomm's consultations in Beijing. 'In Qualcomm's view, everything that needs to be done has already been done.'
But three days later, Donald Trump dropped a 'blockbuster'. Before that, US Treasury Secretary Steven Mnuchin and Chinese Deputy Prime Minister Liu He declared that The world's two largest economies will step back from the edge of the trade war. On this day Trump announced that the US government will impose punitive tariffs on Chinese products exported to the United States worth $50 billion.
'Chinese regulators began to say things like 'Your president has made Liu He embarrassed', 'He annoyed the Chinese people',' said the insider.
At midnight on Wednesday, New York time, the San Diego-based company could only bow to the inevitable result. Since China has not released yet, Qualcomm announced that it will not continue to trade with NXP. 'Obviously, we were It’s getting into something we can’t do,” Steve Mollenkopf, CEO of the company, said a few hours before the deadline.
The Chinese government's reluctance to make a ruling in a timely manner not only stifles the transaction that is crucial to Qualcomm's transformation, but may also change the M&A pattern of US technology companies.
If a company involved in an M&A transaction has a significant business in a country, the country's antitrust regulator has the power to review the transaction, but China has only begun to exercise this right in recent years.
On July 6, the United States began to impose tariffs on the first batch of Chinese imports worth $34 billion. Since then, the US President has repeatedly reiterated that he intends to assess whether he will impose punitive tariffs on all Chinese exports to the United States. The amount exceeds 500 billion US dollars. If a full-scale trade war breaks out, China will have to consider other forms of retaliation, because China imports less goods from the United States and cannot respond to US tariffs in the same way. A large strategic deal is a way, such as Qualcomm's acquisition of NXP's deal.
China’s refusal to approve the deal’ has caused a big red light for any large M&A deal in the semiconductor industry in the short term,” said CCS Insight analyst Geoff Blaber. “Obviously, technology The risk of the industry is very large, especially considering that the semiconductor industry is a major strategic focus of China,' he added. 'This, plus... the whole trade war, really means that Qualcomm has become the overall environment. Unfortunate victim. '
In 2015 and 2016, the semiconductor industry announced more than $200 billion in M&A transactions, including deals between Qualcomm and NXP. The backdrop for the boom in mergers and acquisitions in the field is that with the slowdown in the PC and smartphone industries, small chips Manufacturers seek to increase their size to ensure safety, while large manufacturers strive to diversify their business. In addition, all companies are trying to find their own position before the arrival of 5G technology this year.
But now, Mizuho semiconductor industry analyst Vijay Rakesh said, 'M&A activity has slowed significantly. Now we basically stepped on the brakes.'
Qualcomm and NXP began negotiations in early 2016, when NXP was looking for buyers for its digital network business. By June of that year, the CEOs of the two companies discussed the acquisition of NXP as a whole.
It should have been easy to complete the transaction, because the products of the two companies overlap very little, which means that regulators are less worried about it affecting competition. The acquisition was in 8 jurisdictions before Beijing was in trouble. Approved. However, this transaction, which was brewed before Trump was elected president, eventually became one of the most compelling victims of the Trump administration's aggressive trade policy.
Technically, the Chinese government has not blocked the transaction. After Qualcomm resubmitted the application for approval in mid-April, China's State Administration of Markets (SAMR) has six months to issue the final ruling.
But the silence of Chinese regulators has cast a long shadow on many future transactions that require approval. The investors holding NXP shares have been hit by the termination of the acquisition. They now believe that China’s presence in the global market is a A big risk factor.
'We were completely caught off guard,' said a investment manager holding a heavy position in NXP.
The investor added that China's accession to the global M&A regulatory system 'just made it more difficult to carry out such business'. The investor pointed out that the largest aerospace industry transaction in history - United Technologies The $23 billion acquisition of Rockwell Collins is also subject to regulatory approval before the September deadline.
According to sources familiar with Sino-US trade negotiations, Beijing officials hinted in May that they would approve Qualcomm’s acquisition of NXP’s deal in exchange for Trump’s lifting of the Chinese telecommunications company ZTE (ZTE) for violating the US against Iran and North Korea’s technical embargo imposed sanctions. In order to achieve its goal in Beijing, Qualcomm once said that it would revoke the sanctions against ZTE. ZTE is also an important customer of Qualcomm.
But when Trump resumed its trade rivalry with China, a large US institutional investor began to hedge its investment in NXP.
'We still hold NXP's long position, but we have taken precautions, and our position is much smaller than before,' said a strategist at the agency before Qualcomm announced the abandonment of the acquisition of NXP on Wednesday.
Sherry Fei Ju, Yuan Yang, Xinning Liu added a report
Translator / He Li