China's approval of Qualcomm's proposed acquisition of Dutch NXP Semiconductors valued at some $44 billion hinges on its telecom giant ZTE being saved in the United States, Bloomberg reports, citing sources with knowledge of the situation. Beijing's antitrust watchdog has been probing the merger since late 2016, with the bid being increased and used as a last line of defense against a hostile takeover attempt from Broadcom in the meantime.
ZTE is still crippled by a Commerce Department-issued denial order preventing it from purchasing or licensing any kind of American hardware and software over the next seven years. The company already paid an $892 million fine in 2017 over its previous violations of Washington's trade sanctions imposed on Iran and North Korea but failed to fully adhere to the terms of that settlement, with the federal regulator also alleging it repeatedly lied to its investigators, citing the two developments as the reasons behind the penalty. The Shenzhen-based firm described the ban as unfair and "unacceptable," claiming its latest transgressions weren't intentional and were self-reported to the U.S.
President Trump already confirmed reaching a preliminary agreement with the company that would replace the denial order with another $1.3 billion fine and a wide variety of concessions including management and board changes. His attempt at providing a lifeline to ZTE is still facing bipartisan opposition from Congress and could end up being blocked with a supermajority vote in the coming weeks, Florida Senator Marco Rubio suggested over the weekend. Every factual investigation into the Qualcomm-NXP deal conducted by State Administration for Market Regulation of China's Ministry of Commerce has now been concluded, with the San Diego-based chipmaker and the regulator resolving all of their differences, insiders claim. Procedural issues remain, with Beijing still pushing for assurances that ZTE's ban will be lifted so that the company can resume normal operations and avoid insolvency scenarios. Neither Qualcomm nor President Trump are able to provide the Far Eastern country with such guarantees. While publicly traded on two stock exchanges in its home country, ZTE is majority-owned by the People's Republic of China and always has been, having first been listed in Shenzhen over two decades ago.
Beijing has jurisdiction over Qualcomm's attempted NXP tie-up as China remains the world's largest semiconductor importer, with both involved firms operating in the country on a significant scale. For similar reasons, the merger was previously reviewed by a number of other countries and political blocs, including the European Union. China's antitrust regulator remains the only agency that has yet to greenlight the deal. Closing the NXP consolidation is of imperative importance for Qualcomm that's now seeking to diversify beyond smartphone chips in a much more aggressive manner as its mobile technology dominance is presently being challenged by both potential rivals and its own clients unsatisfied with the company's patent licensing practices.