Qualcomm's purchase of NXP Technologies hung up by U.S.-China trade war

The trade war between the U.S. and China that was started when the U.S. proposed tacking a 25% tariff on certain imports from that country, has since escalated with Chinese retaliation followed by another list of products from China that the U.S. plans to impose a tariff on. This battle between the two countries came about because of President Donald J. Trump's irritation with the U.S.-China trade deficit, which many economists say is actually beneficial to American citizens.

One casualty in this war is Qualcomm's $44 billion acquisition of NXP Technologies. The bid was first announced in October 2016 at $110 a share. Since then, Qualcomm has raised its bid to $127.50 a share for a total of $44 billion. Only one thing is holding back the completion of this transaction, and that happens to be regulatory approval from-you guessed it-China. And in the current environment, Chinese regulatory agencies aren't in the mood to sign off on a transaction that one analyst says is critical to the future of the U.S. chip maker.

NXP is the largest manufacturer of chips for the auto industry. While Qualcomm is still focused on mobile chips for handsets, especially with the next-generation 5G wireless networks ready to go into service as soon as this year, acquiring NXP would make it the industry leader in supplying chips to auto makers. Qualcomm is looking to lessen its dependence on mobile devices.


One problem here is the ticking of the clock. Qualcomm has until April 25th to complete the purchase of NXP, and it seems clear at this point that the only chance Qualcomm has is if the Chinese are willing to do the company a favor and sign off on the transaction.

source: WSJ