Qualcomm is done waiting around for China approval, terminating NXP acquisition
Headquartered in the Netherlands, NXP Semiconductors is a larger and more profitable company than you might imagine, deriving a large chunk of its financial gains from the automotive chip business. That happens to be a very fast-growing market where Qualcomm is not exactly ideally positioned, which is why an already massive $39 billion bid was raised to a staggering $44 billion earlier this year.
But China’s State Administration for Market Regulation didn’t care about the deal’s financial details, refusing to grant a fundamental approval without which the final agreement could never be reached. Instead of continuing to wait around and hold idle hopes the tense relationship between the US government and China would ultimately loosen up, Qualcomm finally chose to end the uncertainty today.
A termination fee of $2 billion will need to be paid to NXP, but despite the direct and indirect damage caused by such a long period of financial unpredictability, Qualcomm stockholders are told to expect “significant accretion and value” driven by a “disciplined execution” and “core strategy of driving Qualcomm technologies into higher growth industries.”
The San Diego-based mammoth is still embroiled in legal battle with Apple, one of its pivotal business partners, which appears intent on strengthening its Intel alliance. On the bright side, Qualcomm thinks it’s “well-positioned for 5G leadership”, and despite stagnant global smartphone sales, its cellular modems and Snapdragon SoCs remain a major profit generator.