Out-Law News 1 min. read

Europe to investigate Qualcomm acquisition of NXP

The European Commission has opened an in-depth investigation into the proposed purchase of semiconductor manufacturer NXP by Qualcomm under EU merger regulations.

Following completion of its phase I investigation, the Commission is concerned that the acquisition could lead to higher prices, less choice and reduced innovation in the semiconductor industry, it said.

Qualcomm and NXP agreed the $47 billion deal in November 2016, in what is reportedly the largest ever transaction concluded in the semiconductor market. The merged business is expected to generate more than $30bn in annual revenues and have leading positions in several markets. 

Qualcomm is looking to acquire the whole of NXP in a move that would combine two of the leading players in the semiconductor industry, the Commission said. The Commission is particularly concerned with competition in near field communication (NFC) and secure element (SE) chips, and those for the automotive industry, it said.

NFC uses radio waves to transmit data between devices, while SE chips are used to increase the security of the transaction. 

In its detailed, phase II investigation, the Commission will investigate whether the merged entity would hold sufficiently strong positions in both baseband chipsets and NFC / SE that would allow it to exclude rival suppliers through practices such as bundling or tying.

The Commission will also consider whether combined company would have the ability and incentive to bundle NXP's NFC intellectual property to Qualcomm's patent portfolio, potentially increasing royalties for customers and excluding competitors.

The Commission expressed concern that the merger would also remove competition in the automotive sector and in particular in technology related to 'connected cars'..

The Commission now has until 17 October to make a decision, it said.

The commissioner in charge of competition policy, Margrethe Vestager, said: “We use our electronic devices every day - mobile phones or tablets. As semiconductors are used in practically every electronic device, we are dependent on them in those devices. With this investigation, we want to ensure that consumers will continue to benefit from secure and innovative products at competitive prices." 

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