China Closely Scrutinizing Qualcomm, Broadcom Deal

A potential mega-merger between chipmaker Broadcom Ltd and US rival Qualcomm Inc is likely to face stern scrutiny in China, antitrust lawyers say, amid a strategic push by Beijing into semiconductors.

Broadcom made an unsolicited $103 billion bid for Qualcomm on Monday, aimed at creating a $200-billion-plus behemoth that could reshape the industry at the heart of mobile phone hardware.

But Chinese regulatory approval could be a hold-up. Beijing and Washington have sparred over technology deals, including in chips, with the Committee on Foreign Investment in the United States knocking back a number of takeovers involving Chinese firms this year, Reuters reported.

The thorny topic is likely to come up when US President Donald Trump visits China this week - with Qualcomm executives in tow.

The merger would face a lengthy review from the anti-monopoly unit of China’s Commerce Ministry, due to strategic concerns, the huge size of the deal and because Qualcomm has come under fire before in the country over competition concerns.

“This is a critical industry for China and Qualcomm has been fined by the ministry of commerce (Mofcom) before so it’s on its radar,” said Wendy Yan, Shanghai-based partner at law firm Faegre Baker Daniels.

Qualcomm agreed to pay a record fine of $975 million in China in 2015 to end a probe into anti-competitive practices related to so-called “double dipping” by billing Chinese customers patent royalty fees in addition to charging for the chips.

China is making a major push to develop its own semiconductor industry under local champions such as Tsinghua Unigroup and Fujian Grand Chip Investment to help cut reliance on global operators including Qualcomm, Samsung Electronics Co Ltd and Intel Corp.

Beijing’s push adds a political edge to the case.

“Mofcom will consider industry security for the whole country, as the semi-conductor industry has strategic importance to China,” a second Shanghai-based antitrust lawyer said, asking not to be named because Qualcomm was a client of his firm.