FTC lays out conditions for Qualcomm merger
Published: 18 Jan. 2018, 20:31
Korea’s antitrust regulator said Thursday that it would approve the merger of American chipmaker Qualcomm and Danish auto parts supplier NXP under several conditions, including the sale of NXP’s core technology license to a third party.
Qualcomm is a major manufacturer of semiconductors, and NXP is the world’s largest supplier of chips for cars. Under Korean law, any merger in which companies’ annual revenue in Korea exceeds 20 billion won ($18.6 million) requires approval from the Fair Trade Commission.
According to the FTC, Qualcomm made 4.6 trillion won, and NFC made 430.3 billion won in Korea last year.
The FTC said it would accept the merger only if Qualcomm commits to selling NXP’s patents for near-field communication, commonly known as NFC, a technology that lets two electronic devices interact wirelessly.
Additionally, Qualcomm cannot impose changes to NXP’s other NFC patents and is prohibited from charging royalties when selling chips. Qualcomm will also have to provide its own NFC standard-essential patent to competitors under fair terms and cannot discriminate by charging different companies different terms.
Qualcomm’s pursuit of NXP made headlines when it was first announced. The $47 billion acquisition is considered to be the biggest deal in the tech industry. Qualcomm’s purchase of NXP is seen as a move into the rapidly growing automotive chip market, with self-driving vehicles and connected cars considered promising markets.
“The pace of innovation in automobile and IoT will increase dramatically and I think we look at it as a tremendous opportunity,” Qualcomm CEO Steven Mollenkopf said in October 2016 when the deal was announced.
Qualcomm and NXP’s businesses do not overlap because Qualcomm’s chips are used in smartphones to connect to wireless networks, while NXP’s NFC is usually applied in areas like wireless payment, security check and other applications like unlocking doors with smartphones.
The FTC’s concern is that once Qualcomm owns NXP, it could raise royalties on patents, including for NFC technology. “Qualcomm has been notorious for charging royalties for its patents in the past,” an FTC official said. The company also often refuses to give rivals access to its patents, even when they’re willing to pay for it, the official said.
Regulators in other countries have expressed similar concerns that once the two companies merge, they will hold a dominant position in both cellular chips sets and NFC chips, thereby limiting rivals, especially in the automotive sector.
According to the FTC, NXP holds a dominant position in the global NFC chip market. As of 2016 NXP made $209 million on NFC chips, holding a 74.6 percent market share while rival Samsung only accounts for 15.4 percent with $43 million.
Qualcomm’s acquisition of NXP was approved in the United States and Taiwan last year. The European Union has yet to make its announcement, though many in the market are speculating that like Korea, the EU authority will likely impose conditions.
Qualcomm Korea refused to comment on the issue saying the decision on whether to comply with the FTC’s conditions is up to its headquarters, but the FTC official said the global headquarters seems to be leaning toward agreeing to the proposal.
This is not the first time that Korean regulators have clashed with the American chipmaker. In December 2016, the FTC slapped its heaviest fine yet - 1.03 trillion won - on charges that Qualcomm violated antitrust laws, including elbowing out competitors by manipulating access to licenses and forcing unfair contracts on smartphone manufacturers.
BY LEE HO-JEONG [[email protected]]
with the Korea JoongAng Daily
To write comments, please log in to one of the accounts.
Standards Board Policy (0/250자)