The European Commission (EC) opened an in-depth investigation into Qualcomm’s proposed acquisition of NXP Semiconductors, citing concerns the deal could: “lead to higher prices, less choice and reduced innovation in the semiconductor industry”.
An investigation is another fly in the ointment for the deal, following reports NXP shareholders are pushing for a higher price. So far, acceptance levels for the transaction are low, although it was suggested some owners were waiting for progress on the regulatory front first.
The EC highlighted three specific concerns. First, the merged company would be in a strong position for baseband silicon (enabling connectivity), NFC and secure element chips, with the “ability and incentive” to exclude rivals through bundling or tying.
Second, the combined company would have the ability to modify NXP’s current intellectual property (IP) licensing practices, including bundling its NFC IP with Qualcomm’s own patent portfolio. The investigation will look at whether this could lead to anticompetitive effects, such as increased royalties and the exclusion of competitors.
Third, the deal could remove competition in the automotive sector, in particular in vehicle-to-everything (V2X) technology, which will play a key role in the connected car market.
Recent reports said Qualcomm was seeking approval for the acquisition without making concessions, a strategy which ran a higher risk of an EC investigation.
It is not clear whether Qualcomm will now look to appease the commission to get the deal approved, but it will certainly need to address the specific concerns.
Acquiring NXP is important for Qualcomm because it will enable the company to broaden its reach beyond its core smartphone market where growth is getting harder to come by. NXP would allow it to bolster its position in the IoT, automotive and security sectors.
The commission has until 17 October 2017 to take a decision.