Qualcomm’s acquisition of NXP Semiconductors is now under “in-depth investigation” by the the European Commission, following an earlier preliminary review. The European Commission announced the start of the investigating today, citing concerns that the acquisition could lead to various issues for European consumers, including “higher prices, less choice and reduced innovation.” Margrethe Vestager, who typically heads up such investigations on behalf of the European Commission noted that semiconductors are so integral to the daily usage of electronic devices, and that consumers have become so dependent on them, that this investigation was needed to “ensure that consumers will continue to benefit from secure and innovative products at competitive prices”.
According to the announcement by the European Commission, the results of its initial research highlighted that such an acquisition could lead to “several issues” in both the smartphone and automotive industries. In particular, the European Commission noted three key areas that will need to be looked at closer during the investigation. The first is what the merger would mean for baseband and NFC chips, and whether rival suppliers will be able to compete fairly. The second was whether the merger could result in Qualcomm “bundling” the NFC patents (owned by NXP) in with its own patent portfolio, and whether this in turn would lead to anticompetitive aspects, such as the lessened ability of rivals to compete with Qualcomm, and/or whether this would result in increased royalties. The third specific point of interest was whether this would remove competition in the automotive sector, at the semiconductor level.
Qualcomm’s other legal issues aside, it is probably not that surprising to see the European Commission taking a closer look at the Qualcomm/NXP deal. After all, when the deal was first announced, it immediately became clear that this is the largest ever acquisition to happen within the semiconductor industry. So there would likely be some who would prefer to rule out any issues that could arise from such a move within one market. Although it does only currently seem to be those in Europe who will be taking a closer look at the deal and its potential ramifications - as back in April of this year, US regulators approved the acquisition. In either case, the announcement does explain that the European Commission will make its decision by Oct. 17.
A Qualcomm spokesperson has reached to offer a comment on the EU's Phase II investigation, stating that
"Qualcomm confirms that the European Commission has initiated a Phase II review of the proposed acquisition of NXP. As stated previously, both companies expected a thorough review process and are working closely with relevant regulators, including the European Commission, to obtain the necessary approvals. Qualcomm has already received clearance from the United States Federal Trade Commission.
This acquisition is complementary, and driven by the belief that the combined efforts of the two companies will produce even greater innovation than they would alone. This significant investment by Qualcomm will help our industry partners in the automotive, IoT and security sectors advance their digital transformation and further the digitization of industries worldwide.
Qualcomm is confident that it can address the concerns raised by the European Commission and intends to continue working with the Commission and other regulators to secure clearance. Qualcomm continues to expect this transaction to close by the end of 2017."