Qualcomm-NXP deal getting delayed, thanks to China-US spat

We had last month listed the companies that would be affected in the event of a trade war between the US and China. And Qualcomm Inc (QCOM) was one of them. As predicted, Qualcomm is now caught up in this mess between both the countries.

Qualcomm’s proposed acquisition of NXP Semiconductors (NXPI) is getting delayed as China is allegedly dilly-dallying with approvals. It may be noted that the deal has secured approvals from all other jurisdictions.

The underlying trade issues between the US and China are being cited as the primary reasons for the delay. Qualcomm withdrew its antitrust application on Saturday at the behest of the Ministry of Commerce and will refile it at the earliest giving the ministry another six months to review the deal.

The NXP deal is important to Qualcomm and there are concerns that China could use it as leverage to gain an edge in the current trade situation. Qualcomm is said to have assured the Ministry of Commerce of a waiver for NXP customers from purchasing Qualcomm’s licenses. The deadline for completion of the deal is April 25.

The Qualcomm deal is not the only one put on hold by the Chinese government. They have also halted the sale of Toshiba’s memory chip business to a Bain Capital-led consortium due to trade pressures.

Qualcomm, meanwhile, is also dealing with legal issues with Apple Inc. (AAPL) which could cost it a huge amount in fines. If the deal gets cancelled, Qualcomm will have to pay NXP a separation fee, which would hurt its operating cash flow.

Qualcomm believes the NXP merger will be beneficial to it in terms of opportunities in the Internet of Things market, which it estimates to be worth over $75 billion over the next two years.