Qualcomm’s board benefitted from protectionism to nix the Broadcom acquisition, but is now discovering there are two sides to that game.
According to Bloomberg Chinese regulators aren’t happy with the amount of reassurance and remedies offered by Qualcomm that would somehow ‘protect’ Chinese companies if it buys NXP. This position has apparently been prompted by lobbying from Chinese firms arguing the deal could hurt them and thus should be blocked.
Now where could they have got that idea? Qualcomm’s board eventually got the Broadcom hostile acquisition blocked by complaining to regulators, who referred it to President Trump to apply the coup de grâce. Qualcomm was presumably acutely aware of Trump’s nationalist tendencies and particular distrust of China when it referred the case to the US state and it got what it wanted.
It stands to reason, therefore, that the Chinese state would feel inclined to at least return the favour and listen with a sympathetic ear to reciprocal complaints from its own companies. Chinese premier Xi Jinping, who recently promoted himself to President For Life, is a bit more subtle than Trump, but no less inclined to take a backward step.
The Bloomberg report emphasises a more positive strategic angle, that China is trying to promote domestic semiconductor champions, but that’s still protectionism by a different name. Another piece of Bloomberg analysis directly confronts the issue of M&A tit-for-tat and the fact that protectionism always escalates in a mutually harmful manner.
Qualcomm, whether it likes it or not, is right in the middle of this current escalation. Having benefitted from protectionism with Broadcom it really can’t complain about now being a casualty of it with NXP. It will be interesting to see whether there are any concessions Qualcomm can make to win over Chinese regulators or whether the acquisition will be blocked no matter what.