Qualcomm Has Given up on Acquiring NXP, and May Face More Challenges in the Future, Says TrendForce

Qualcomm, the leading manufacturer of telecommunications chips and mobile processors, announced its decision to terminate the $47 billion purchase agreement to acquire NXP, a Dutch company known for automotive and IoT chips, after China’s Ministry of Commerce failed to approve the deal. Qualcomm’s business has been influenced by the slowing smartphone sales recently, and would face more risks brought by the saturated market in the future, says TrendForce.

Qualcomm has been influenced by slowing smartphone sales and licensing business

According to TrendForce analyst CY Yao, the global smartphone market has been saturated, but it is still unclear whether 5G could bring new growth momentum to the whole industry. As the business models for 5G are not yet clear, it is uncertain whether 5G developments could lead to new replacement purchases. The market situation will still depend on the attitude of telecommunications operators in the near term.

Yao notes that, based on the performance of Qualcomm, it is hard for the company to achieve future growth with revenue from the smartphone market alone. Moreover, its lower-than-expected revenue from licensing business, QTL, may also influence the company’s profitability in the future. In order to make breakthroughs in the short term, Qualcomm would continue to strengthen the sales of RFFE products, and to increase the market share in IoT and automotive sectors.

The impacts of the failed acquisition on Chinese domestic semiconductor industry

On the other hand, China has been investing heavily in its domestic semiconductor industry, and Chinese chipmakers would buy some time for development after the failed acquisition. If the deal were approved, Qualcomm would be able to significantly improve its technical strength, develop a wider range of solutions, and diversify its customer base. This would be a huge challenge or even risk for Chinese chipmakers and the domestic semiconductor industry of China.

JAC Capital has bought RFSOI and the Standard Products business of NXP in 2016, showing that NXP has a good relationship with China-based funds. If the management board of NXP decides to sell the company, then China is bound to take action, such as buying NXP to improve the country’s technical strength in developing chip solutions.

If NXP is not to be sold, China will still continue to develop its domestic semiconductor industry. Chinese chipmakers will aim to provide domestic-made chips for automotive, IoT, and security applications.