Brussels
13 June 2017
Reporter: Barney Dixon

European Commission to investigate Qualcomm


The European Commission has launched an investigation into Qualcomm's proposed $47 billion acquisition of semiconductor rival NXP.

The investigation was instituted under the EU Merger Regulation over concerns that the deal could lead to higher prices, less choice and reduced innovation in the semiconductor industry.

Qualcomm and NXP both hold significant shares of the semiconductor, with Qualcomm focusing on baseband chipsets for cellular telecommunications and NXP producing semiconductors for the automotive industry.

NXP also provides near-field communication chips and secure elements for mobile devices.

Commissioner Margrethe Vestager, in charge of competition policy, 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.”

The European Commission’s initial investigation into the deal raised “several issues relating in particular to semiconductors used in mobile devices and in the automotive industry”.

Chiefly, a merger would give the new business the ability to exclude rival suppliers from both the baseband chipset and the near field communication chipset markets.

The European Commission plans to investigate whether the acquisition could lead to anti-competitive effects, including increased royalties and exclusion of competitors.

Last year, Qualcomm was hit with a $975 million anti-trust fine in China for charging royalties on standard-essential patents.

Inventions considered essential as an industry standard, such as WiFi, for example, must have their patents available to license on fair, reasonable and non-discriminatory (FRAND) terms.

Under the settlement with Chinese authorities, Qualcomm pledged to license its 3G and 4G standard-essential Chinese patents on FRAND terms and negotiated a series of new deals with various telecommunications companies.

But Qualcomm’s woes did not end there. In early January, Qualcomm was hit with a fine of $853.4 million by the Korea Fair Trade Commission (KFTC) for violating anti-trust laws, the largest ever handed to an individual company.

The KFTC imposed the fine following an investigation into Qualcomm’s alleged abuse of standard-essential patents.

Then, later in January, the company was hit with a US Federal Trade Commission lawsuit, which claimed the semiconductor company had engaged in “exclusionary conduct that taxes its competitors’ baseband processor sales, reduces competitors’ ability and incentive to innovate, and raises prices paid by consumers for cell phones and tables”.

Soon after, Apple took Qualcomm to court in the US for nearly $1 billion, alleging that Qualcomm had “unfairly insisted on charging royalties for technologies they have nothing to do with”.

While Qualcomm has yet to officially comment on the European Commission’s investigation, the company has stringently denied allegations of standard-essential patent abuse, most recently accusing Apple of undermining its licence agreements.

A Qualcomm spokesperson confirmed the investigation and said that "both companies expected a thorough review process and are working closely with relevant regulators".

“Qualcomm has already received clearance from the US Federal Trade Commission,” the spokesperson pointed out.

The semiconductor company said the acquisition is “complementary” and driven by the belief that the combined efforts of the two would allow for even greater innovation than they would alone.

The spokesperson said Qualcomm is “confident that it can address the concerns raised by the EU 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.”

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