[Net exposure to the Chinese government or will approve Qualcomm's acquisition of NXP] A few hours ago, the foreign media "Wall Street Journal" disclosed a news: The Chinese government may approve Qualcomm's acquisition of NXP (NXP) in the next few days. The corresponding procedure will start as soon as this Monday, which is today.
Referring to the recent developments in the trade war between China and the United States, as well as the various "performance" Qualcomm has recently seen in China, China's regulatory authorities, the "regulatory impediments" that ultimately block acquisitions, are likely to eventually be "resolved."
This is definitely a good thing that Qualcomm has been waiting for.
Commitment to Open Road, Qualcomm is Necessary for NXP
Let's briefly talk about Qualcomm's idea that it has a relatively deep accumulation of technology in the field of mobile communications, but cannot stand up to the constant catch-up of other companies in communications technology and the checks and balances of the entire communications industry. Therefore, it is necessary to “anchor†the future application scenarios of communication technologies in advance.
And this "anchor" is actually NXP.
Similar to Qualcomm, although NXP is a semiconductor company, its specific business bias is very obvious (the market and leading position of the semiconductor industry are subdivided). The business that serves as the pillar of NXP is the automobile. In the NXP2018 first-quarter financial report, the income of “carâ€-related business accounted for 48% of the total revenue, followed by NXP’s mobile NFC and corporate encryption chips.
NXP's latest fiscal quarter accounts for revenue
For now, NXP has covered the high-performance processors required for automotive ADAS functions and has also developed an autopilot system platform. Unlike many companies that are currently talking about autopilot, NXP has occupied the highest share of high-performance processors in the current automotive industry, and it has also taken a long way toward industrial solutions.
According to Qualcomm's calculations, as long as High Pass receives NXP, it will be able to lay a leading position in 4 areas (mobile devices, automobiles, IoT, and network infrastructure) at one go.
Although the two companies are in the same general direction (mobile communications + automotive + IoT + network infrastructure), Qualcomm and NXP have very little overlapping in their specific businesses. It is reasonable that they will not expand the monopoly power in an area because of acquisitions. So the acquisition should also be easy to do.
However, Qualcomm is a "professional" defendant against anti-monopoly cases. Because of a series of behaviors such as business models and commercial competition in mobile communications technology, it has already gone to court several times and has paid billions of dollars in fines.
This intangible has added many difficulties to Qualcomm's acquisitions. In the case of the second-most-repeated EU, Gao GM’s following promises were passed:
Qualcomm will abandon the acquisition of NXP Semiconductors' NFC-related "standard-necessary patents" and some non-standard essential patents;
These patents will be transferred to third parties, facing the world for royalty-free authorization for 3 years;
Qualcomm will acquire NFC-related non-standard essential patents, and Qualcomm will not use it to suppress competitors and perform royalty-free authorization.
These moves do not seem to be "high-pass." The reason behind it is also very simple. Qualcomm really does not want to drag on anymore.
"Cheng Jiejin" Broadcom, let Gaotong really lose the skin
Qualcomm announced the acquisition of the NXP proposal in October 2016. Just one year after the proposal was put forward, Qualcomm continued to be stuck in the “monitoring quagmire†section. Another company called “Broadcom†had come in and announced that it wanted to acquire Qualcomm.
Broadcom's business can basically be summarized as: wired network infrastructure, wireless communications, enterprise-class storage, industrial and other, importance is also in this order from strong to weak.
According to Broadcom's latest financial report for the 2018 fiscal year, the revenue of the wired network infrastructure business accounted for 35% of the total, and the wireless communications business accounted for more than 41%. Together, they already accounted for 76% of the overall ratio. This also brings out Broadcom's inner abacus: “As long as we receive Qualcomm, I will be the world’s number one in terms of network infrastructure. As for NXP, it wouldn’t matter if you can get the best and you can't accept it.â€
However, unlike Qualcomm’s “calm and friendship†when it acquired NXP, Qualcomm is not willing to be acquired by Broadcom, but the latter did not give up, but instead announced directly that it would consider hostile takeovers.
This “arbitrary†style is also very much related to Broadcom’s current CEO OhockTan, because as early as this acquisition, he has made three acquisitions between semiconductor giants: LSI and Avago, Avago and Broadcom, Broadcom and Brocade ( Brocade has recently completed the formal acquisition.) His previous identity is actually the CEO of Avago.
In order to achieve the goal of acquiring Qualcomm, HockTan also used its means to not only openly win over and put Qualcomm shareholders, but also constantly adjusted its purchase price to Qualcomm - first to increase prices first, and later, Qualcomm did not cooperate and abruptly cut prices. And also dropped the pot of price cuts to Qualcomm (said Qualcomm did not cooperate with the acquisition).
Dramatically, after four months of repeated tossing, the uncle Trump, who used Twitter to govern the country, abruptly terminated Broadcom's takeover behavior in the form of a presidential executive order. The reason given was "as the (Broadcom) hostile takeover. As a result, China may launch strong competition to fill any space left by Qualcomm."
Since the president has spoken, Broadcom has stopped, and the price is also, that is, a maximum of 4 to 5 billion US dollars for the "acquisition break-up fee." In contrast, Qualcomm has a lot to lose:
In order to counter the Broadcom acquisition, Qualcomm raised the purchase price of NXP once. From the previous $110 per share, it mentioned $127.5 per share, and the acquisition cost has risen a lot.
Paul Jacobs, former Chairman and CEO of Qualcomm, had retired from Qualcomm in order to avoid suspicion and has so far failed to return to Qualcomm’s board of directors;
At the end of April this year, Qualcomm laid off 1,500 people in the United States to cut spending.
After all, the capital struggle was cruel. Qualcomm was really hurt by fighting.
Good day? What should other people think?
Chairman and CEO of Qualcomm Paul Jacob
If you have to use one word to describe the situation before Qualcomm, it is most appropriate to “ride the tigerâ€: on the one hand, the future is determined by oneself. On the other hand, the opponent’s hostile takeover is caught in the two battle lines. Get out of the skin.
This also makes "complete NXP acquisition" is very important for Qualcomm. The market has also given a response. As soon as China’s supervision is about to pass the acquisition plan, Qualcomm and NXP’s share price have both increased significantly.
Of course, some people may ask: Does Qualcomm use NXP's technology to replicate "high-pass tax" in other fields? The answer is "possible but impossible."
Because NXP has long been deeply plowed in fields such as automobiles, NFC, security chips, etc., there are also many corresponding patents, and Qualcomm is indeed a company that insists on “chasing†commercial interests, and uses patents in the 3G era to earn a lot of benefits.
But it was Qualcomm’s “aggressiveness†that allowed other companies to unite and establish industry associations such as 3GPP, and began to use the influence of industry associations to dominate the development of the industry (the previous Huawei incident was an obvious one). Under the continuous efforts of other companies, Qualcomm’s technological advantage in the 4G era has not been as big as 3G. Correspondingly, the global communications industry has also ushered in a wave of rapid development. Industry associations take into account both the interests of enterprises and countries while ensuring the compatibility and technical scalability of global mobile communications networks.
If Qualcomm can replicate the billion-dollar role of "squid" in the field of automated driving that requires technological progress, it should ultimately benefit the industry.
what? What do you say if Qualcomm really monopolizes? Fear of jealousy, the "hammer hammer" in the hands of regulators is not a vegetarian.
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