The European Commission (EC) has opened an in-depth investigation to assess Qualcomm's $38-billion bid for NXP Semiconductors, adding up pressure on the U.S. smartphone chipmaker to offer concessions to address their concerns.
The Commission has concerns that the transaction could lead to higher prices, less choice and reduced innovation in the semiconductor industry.
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 proposed transaction involves the acquisition of the whole of NXP by Qualcomm and would combine two of the leading players in the semiconductor industry. Qualcomm develops and supplies baseband chipsets (both standalone and integrated with an application processor) enabling cellular telecommunications standards such as UMTS and LTE. NXP is an important provider of semiconductors, in particular for the automotive industry. With respect to mobile devices, NXP is a leading provider of near-field communication chips and secure elements.
The Commission's initial market investigation raised several issues relating in particular to semiconductors used in mobile devices, such as smartphones, and in the automotive industry. The Commission is concerned that a possible merged entity would hold strong market positions within both baseband chipsets and NFC/SEs chips, and would have the ability and incentive to exclude their rival suppliers from these markets through practices such as bundling or tying.
The merged entity would have the ability and incentive to modify NXP's current intellectual property licensing practices, in particular in relation to NFC technology, including by bundling the acquired NFC intellectual property to Qualcomm's patent portfolio. The Commission will investigate whether such conduct could lead to anticompetitive effects, such as increased royalties for customers and/or exclusion of competitors.
The Commission also voiced concerns about reduced competition in semiconductors used in cars.
The Commission now 90 working days, until 17 October 2017, to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.