Qualcomm-NXP deal falls victim to trade war
US tech giant forced to abandon effort after failing to win approval in China
US telecom-equipment maker Qualcomm’s bid to acquire Dutch chipmaker NXP, which has been in the works for almost two years, was finally abandoned on Thursday, in a turn described as “a flip of a coin.”
Analysts had warned in recent months that the deal was a prime target for China to exercise leverage in an ongoing trade conflict with the United States.
“We were prepared for this,” NXP chief executive Rick Clemmer said in an interview on Thursday, as reported by The Wall Street Journal. “We were very confident about the transaction closing until a few months ago. We realized it was a flip of a coin.”
What happened a few months ago to change the sentiment was the dramatic ratcheting up of trade tensions between China and the United States, including a crippling ban placed on sales of US components to Chinese telecommunications giant ZTE.
While the administration of US President Donald Trump ultimately decided to grant leniency to ZTE, bilateral relations between Washington and Beijing took a sharp turn for the worse after the imposition of sanctions on imports from China.
Cheerleaders for the Trump administration’s confrontational approach to trade with China who were critics of the decision to lift the ZTE ban pounced on the decision as a reason to escalate the conflict even further.
#TradeWar with #China has just gone nuke. Beijing did not grant approval for #Qualcomm takeover of #NXP even after #Trump gave relief to #ZTE, a big concession. Now we should know it's not possible to bargain with #XiJinping. We have to see this to the end.
— Gordon G. Chang (@GordonGChang) July 26, 2018
Qualcomm has agreed to pay a termination fee of US$2 billion to NXP, according to a statement from the company.
“Qualcomm also announced today that its board of directors authorized a stock repurchase program of $30 billion, which replaces the company’s existing $10 billion stock repurchase authorization,” the statement said.