Qualcomm Ended NXP Acquistion After Failing To Secure Chinese Approval (cnet.com) 39
hackingbear writes: Qualcomm officially terminated the deal to buy Dutch semiconductor giant NXP after failing to get a decision from regulators in China by its deadline. It must now shell out a previously agreed upon $2 billion termination fee. The Chinese market accounts for 30% of Qualcomm's revenue. China's refusal of the approval can also be a retaliation against an $1.4 billion penalty against ZTE imposed by the U.S. Department of Commerce over technicalities of ZTE's violation of Iran sanctions, a move viewed by China as a U.S. excuse to launch a trade war. "It's a reminder that trade wars are maybe not that easy to win," says Steven Roach of Morgan Stanley. "And China has a lot of ammunition up its sleeve." Roach urged the Trump administration to understand that the U.S. and China "need each other," saying low-price Chinese imports are needed to "make ends meet" for cash-strapped Americans. Separately, in a hearing at the Office of United States Trade Representative for imposing additional tariffs on Chinese imports due to the alleged intellectual property theft by China, an accusation that the U.S. itself had committed, out of some 61 figures from the country's chemical, electronics, and solar energy sectors, only six expressed their support for the move.
Trump Knows Economy (Score:1)
Nagh. He doesn't.
Trade wars aren't things you "win" and all you do is cost your own people more.
Qualcomm isn't even a US firm... but now they're paying the price for one orange hubris.
E
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What i do not understand is why the merger requires Chinese approval.
Both Qualcomm and NXP have operations in China, and China is their biggest market. Nearly all large mergers require approval of the "Big 3" (US, EU, China).
Qualcomm's investors seem to agree with China that this merger was a bad idea, since Qualcomm's stock rose on the announcement of the cancellation.
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What i do not understand is why the merger requires Chinese approval.
They required approval to continue operating within China after merging. Pretty much every major economic power reviews mergers of foreign companies that operate within their markets, US and EU included. Usually there's a threshold I think; they review it if the foreign companies have a large enough market influence/impact.
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Your story is a nice theory but in practice it works the other way around: can we invent a story based on the law to allow or block this merger, whetaver the desired outcome is.
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This non-action response in this case being a tactic in the trade dispute is only a theory propagated by the American side, and indeed denied by the Chinese government officially.
So this is no different that the U.S. using Iran sanction violation to punish ZTE as the first shot of the trade war. The U.S. would insist it is for "national security." But why would anyone really believe that?
The U.S. commits strong arming just like everybody else.
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Those criticizing Trump's war are really saying "DON'T ROCK THE BOAT!". Those who negotiated US trade policies are making handsome profits and could care less about the effect
I couldn't care less about the rest of your comment.
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Growing the economy so that the unemployment rate is at historical lows is caring about those struggling
One of the justifications for the claim that the economy is growing is the number of people employed - but the unemployment rate isn't the best measure, especially on its own. The participation rate for the US has been pretty much flat at about 62-63% for the last four years, and shows a steady decline from 2008 where it was 66%. That's still only looking at people who are actively seeking work. Those who have given up aren't counted, just as those who haven't looked for work in the last 4 weeks are 'unempl
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The article you cite does not mention the aging Baby Boomer generation even once.
I'm not saying retiring Boomers explains away the whole decline, but to fail to include a large, well-known, and anticipated demographic shift in an analysis on participation rate---even to refute its effect---makes the whole thing suspect.
China stopped and American company buying dutch? (Score:2)
How is this in China's jurisdiction?
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As TFS summary itself mentions, China represents 30% of Qualcomm's revenue. NXP similarly does significant business in China. Losing that market would be a massive loss, so they chose not to merge rather than lose access to the
The con artist should know (Score:4, Insightful)
low-price Chinese imports are needed to "make ends meet" for cash-strapped Americans.
It's why he has his name brand clothes made in China rather than U.S. and until recently, so did his daughter.
Funny how the con artist touts made in America yet refuses to have his stuff made here.
Logical (Score:2)
The Chinese learnt from the ZTE case that yu should do as little as possible buisiness with American companies. NXP is now a Dutch company, but it would become a US company subject to their idiot sanctions. Trump tried to prevert sanctions against ZTE but congress didn't let him. So now the US gets repaid for the congress decision.
As a Dutch national I'm disappointed that it required action from the Chinese to block this merger. The Dutch government itself should have prevented that US companies would buy u
Re: Logical (Score:1)
What we need is a Kind of Airbus for Semiconductors and IT.
Infineon and ST should join NXP.
Re:Logical (Score:4, Insightful)
Good, because ZTE violated all sorts of regulations that were inposed on it.
The only reason Trump supported ZTE was China invested $500M into Trump hotels and granted Ivanka Trump a rare Chinese trademark. That's it. A little backroom dealing and let's forget that we asked you nicely to not resell those parts to places we asked you not to. And it's not like it was the first time, either.
If you ever wonder why Trump seems to care for Putin, again, remember Russia is one of the few places where Trump's business are actually succeeding, quite well in fact. Everywhere else they are doing terribly. All this from a President who has not divested himself of his businesses while in power.
Congress simply grew a backbone and enforced the order. Or shall we say, China did not scratch their backs obviously.
Two Beellion! dollars (Score:5, Interesting)
What gets me is the size of the 2 billion dollar termination fee for a deal only worth 44 billion dollars in total.
A termination fee is only supposed to cover the cost of due diligence and legal preparations leading up to the takeover or merger.. In some cases the boards establish an excessive termination fee to ensure shareholders approve a deal, because they know the company will receive a crippling penalty if they don't give approval.
I've read that a reasonable termination fee should not exceed 2 per cent of the total value or $880 million in this case (still way too high IMO).
Re:Two Beellion! dollars (Score:4, Insightful)
It was not just a DD+legal, NXP divested their standard products and small signal stuff as Nexperia and imported some of the culture and practices of giving out technical information to SME customers.
I know quite a few companies that dropped NXP out from their design-in process due to merger, which causes long term damage. They also EOLed number of special discretes, but that was unfortunately to be expected and many companies bought lifetime supplies when the deal was announced.
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This wasn't a merger. This was a mess. Now that the deal is off Qualcomm are $2bn poorer, but NXP is a very different company than it was before due to the number of changes that were made to get the merger through.
I doubt $2bn will actually cover the costs.
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NXP is a very different company than it was before due to the number of changes that were made to get the merger through.
Can you elaborate on that?
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Yes, from the very beginning in 2016 when Qualcomm and NXP announced their intention to merge they knew they would not get past any regulators. The actual investment plan involved the divestment of a chunk of NXP before the Qualcomm merger goes ahead, that was one of the reasons why there was such a high $2bn penalty as a result.
It didn't cover the costs because NXP divested it's Standard Products division to MCHI for $2.8bn keeping only the parts of the company that Qualcomm was actually interested in. How
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American dream (Score:1)
[...] low-price Chinese imports are needed to "make ends meet" for cash-strapped Americans [...]
So much for the American Dream.
"[...] an upward social mobility for the family and children, achieved through hard work in a society with few barriers"
(https://en.wikipedia.org/wiki/American_Dream)
I don't live in the USA but somehow the qoute makes me sad.