EU Opens In-Depth Probe Into Qualcomm-NXP Deal--Update

By Natalia Drozdiak Features Dow Jones Newswires

Qualcomm Inc.'s bid to acquire NXP Semiconductors NV faces an in-depth probe by the European Union on concerns the deal could lead to higher prices, less choice and reduced innovation in the semiconductor industry, the EU's antitrust regulator said Friday.

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The move opens up another front by the EU against the U.S. chip maker, which the EU watchdog is already investigating for alleged breaches of antitrust rules.

The European Commission said it was concerned the newly merged company would hold strong market positions with both baseband chipsets and chips for mobile devices, giving the company the incentive to exclude rival suppliers from the market or even modify NXP's current intellectual property licensing practices. The deal would also remove competition in the market for chips used in the automotive sector, the EU said.

Qualcomm agreed to buy Netherlands-based NXP for $39 billion in October, in a deal that would make it one of the top suppliers of chips used in cars at a time when manufacturers are building cars with greater computer power and as self-driving models develop.

"With this investigation, we want to ensure that consumers will continue to benefit from secure and innovative products at competitive prices," said EU antitrust chief Margrethe Vestager.

In-depth investigations are common in EU merger reviews. A full-blown review allows companies several more months to come up with remedies, like selling assets, to offer the regulator in exchange for clearance. The commission could still clear the deal without conditions, or block it, if it deems any remedies offered to be insufficient to assuage antitrust concerns.

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Write to Natalia Drozdiak at natalia.drozdiak@wsj.com

BRUSSELS -- Qualcomm Inc.'s bid to acquire NXP Semiconductors NV faces an in-depth probe by the European Union on concerns the deal could lead to higher prices, less choice and reduced innovation in the semiconductor industry, the EU's antitrust regulator said Friday.

The move opens up another front by the EU against the U.S. chip maker, which the EU watchdog is already investigating for alleged breaches of antitrust rules.

The European Commission said it was concerned the newly merged company would hold strong market positions with both cellular chipsets and chips for near-field communications, giving the company the incentive to exclude rival suppliers from the market or even modify NXP's current intellectual property licensing practices. The deal might also remove competition in the market for chips used in the automotive sector, the EU said.

Qualcomm agreed to buy Netherlands-based NXP for $39 billion in October, in a deal that would make it one of the top suppliers of chips used in cars at a time when manufacturers are building cars with greater computer power and as self-driving models develop.

"With this investigation, we want to ensure that consumers will continue to benefit from secure and innovative products at competitive prices," said EU antitrust chief Margrethe Vestager.

In a statement, Qualcomm said "both companies expected a thorough review process and are working closely with relevant regulators, including the European Commission, to obtain the necessary approvals." Qualcomm also said it was "confident" it could address the EU's concerns, adding it still expects the transaction to close by the end of the year. The deal has already won the green-light from U.S. antitrust authorities.

In-depth investigations are common in EU merger reviews. A full-blown review allows companies several more months to come up with remedies, like selling assets, to offer the regulator in exchange for clearance. The commission could still clear the deal without conditions, or block it, if it deems any remedies offered to be insufficient to assuage antitrust concerns.

The probe comes as the EU scrutinizes Qualcomm's behavior in other areas. The commission in December 2015 formally accused Qualcomm of illegally paying a major customer to exclusively use its chips and selling chips below cost to force a competitor, Icera Inc., out of the market.

Qualcomm has previously said its sales practices "have always complied with European competition law."

The antitrust cases against Qualcomm are "still a work in progress," Ms. Vestager said in an interview in March, adding that she considered them important cases because of the implications for mobile communications.

Qualcomm, based in San Diego, is the largest supplier of chips for mobile devices, including baseband chips that provide cellular connections and processors that run smartphone applications. But Qualcomm earns most of its profits from charging handset makers royalties for using its cellular patents. Most other government investigations so far have focused on its licensing practices.

The U.S. chip maker's legal woes grew this year after Apple Inc. in January opened a legal battle against the company by suing Qualcomm in the U.S., and later in China and the U.K. -- building on international resistance to Qualcomm's patent-licensing business that has included antitrust investigations and fines in China, South Korea and the U.S.

--Ted Greenwald contributed to this article.

Write to Natalia Drozdiak at natalia.drozdiak@wsj.com

(END) Dow Jones Newswires

June 09, 2017 12:14 ET (16:14 GMT)