 China dodges blame for Qualcomm-NXP merger demise Beijing (AFP) July 27, 2018 - China on Friday sought to deflect blame after US chipmaker Qualcomm dropped a merger with Dutch rival NXP over its failure to receive Chinese regulatory blessing, with Beijing saying it was still open to discussions. The unexpected statement came a day after the American tech giant called off the planned $43-billion merger, which had failed to receive approval from Chinese antitrust authorities -- an apparent casualty of ongoing trade tensions between Washington and Beijing. The State Administration for Market Regulation (SAMR) said it "knows that Qualcomm and NXP have decided to abandon the transaction, and finds that regrettable". "The results of our evaluation show that Qualcomm's latest plan cannot resolve competition issues... we hope to continue communicating with Qualcomm to find a solution within the review period." It was not immediately clear whether the regulator's statement meant the deal could potentially be revived. "Companies including Qualcomm, NXP are welcome to do business in China as long as they bring benefits to the Chinese people and help create a business environment that is international, lawful and convenient," SAMR added. The tie-up was aimed at creating a diversified chipmaker combining Qualcomm's dominant position in smartphones and NXP's foothold in the market for chips that power "internet of things" connected devices. Chinese regulators said the deal would have created a virtual monopoly with "deep and far-reaching" consequences. Qualcomm said it would pay NXP a $2-billion break-up fee and begin a $30-billion stock repurchase plan. China has voiced long-term plans to boost innovation and growth in its own high-tech sector, a strategy aimed at challenging US dominance and reducing Chinese reliance on foreign chips and other technology. US Treasury Secretary Steven Mnuchin expressed disappointment that the deal fell through but sidestepped questions on whether it was related to the standoff with China. Officials in Beijing have also denied any link between the merger's collapse and China-US trade frictions. The US slapped 25 percent tariffs on $34 billion in Chinese goods and steep tariffs on steel and aluminium, and US President Donald Trump has said he is ready to impose tariffs on all $500 billion of Chinese imports. This has prompted a tit-for-tat response, with Beijing hitting back with import duties on US goods. On Thursday, Chinese regulators greenlit a proposed merger between French lens-maker Essilor and Luxottica, the Italian eyewear company that produces Ray-Ban and Oakley sunglasses. The deal had already been approved in four other key markets -- the US, Europe, Canada and Brazil. But China's consent came attached with a list of conditions restricting the combined company's operations in China, including not selling eyewear below cost without justifiable reason.
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US computer chip giant Qualcomm abandoned a $43 billion merger with Dutch rival NXP on Thursday, as the deal became an apparent casualty to trade tensions between Washington and Beijing.
The deal was called off after antitrust authorities in China failed to approve the merger after a two-year wait.
The decision ends the tie-up aimed at creating a diversified chipmaker with Qualcomm's dominant position in smartphones and NXP's foothold in the market for chips powering "internet of things" connected devices.
Qualcomm said it would pay NXP a $2 billion dollar breakup fee required under its agreement, and would begin a $30 billion stock repurchase plan.
US Treasury Secretary Steven Mnuchin expressed disappointment that the deal fell through but sidestepped questions on whether it was related to the standoff with Beijing.
The deal "was approved in every single other territory," Mnuchin told CNBC television, adding that "we're just looking for US companies to be treated fairly.
"I think it's unfortunate that that didn't get approved after a long two-year process."
Analyst Patrick Moorhead of Moor Insights & Strategy said the merger plan was clearly a victim of the trade dispute between the US and China.
"This wasn't an American company trying to buy a Chinese company," Moorhead said.
"There were not even any protests that Qualcomm could go in and fix. To me it's belligerent and will lead to an escalation."
Analysts at the political consulting firm Eurasia Group also warned of worsening tensions as a result of the deal's collapse.
A research note from the group said that China's decision appeared to be a "naked politicization" of its antitrust review and suggests a breakdown in the bilateral relationship.
"The move does increase the risk that the US will target Huawei or other Chinese tech firms through executive action when it finds a legal basis for doing so," the research note said.
The California firm ended its effort when the bid expired at 11:59 pm Eastern time (0359 GMT Thursday).
In Beijing, officials denied that tensions with Washington affected the proposed merger.
"The issue with the case is related to anti-monopoly law enforcement and has nothing to do with China-US trade frictions," commerce ministry spokesman Gao Feng told reporters at a weekly press briefing Thursday.
The deal's collapse comes with the US set to ramp up tariffs on Chinese imports following President Donald Trump's complaints of unfair trade.
- Rubio rails at ZTE -
Recently the US imposed tough sanctions on Chinese tech firm ZTE that could have led to the firm's collapse, but the Trump administration later reached a deal that helped the firm remain in business.
US Senator Marco Rubio slammed the move by China and said Washington should retaliate.
Rubio tweeted that "@CommerceGov does #China a favor & reverses ban on #ZTE buying chips from Qualcomm. And how did China return the favor? By blocking Qualcomm deal with NXP despite the begging & pleading from @USTreasury & Commerce Dept. We should reimpose ZTE ban."
Qualcomm had extended the deadline several times for the tie-up, which would have given the dominant smartphone chipmaker firm a broader array of semiconductor products.
It also raised its bid -- from $110 to $127 a share -- in February, to the irritation of fellow chipmaker Broadcom, which itself recently launched a hostile bid for Qualcomm blocked by the White House.
Washington said the acquisition of Qualcomm by Broadcom -- which had been Singapore-based until its recent relocation to the US -- would help Chinese competitors such as Huawei, particularly in the emerging market for fifth generation (5G) wireless internet, where a stronger China could present a national security issue.
Based in the Dutch town of Eindhoven, NXP is a leading maker of chips for the auto industry, as well as for contactless payment systems.
A former division of the Dutch electronics giant Philips, it became independent in 2006.
NXP's president and CEO Richard Clemmer said, "While it is unfortunate that the semiconductor powerhouse that would have resulted from the transaction with Qualcomm could not close after 21 months of diligent efforts by the team, we are confident in our future as an independent market leader."
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