By Lingling Wei and Yoko Kubota in Beijing and Takashi Mochizuki in Tokyo
BEIJING -- Amid escalating trade tensions, China is holding up
deal reviews that could clear the way for U.S. companies Qualcomm
Inc. and Bain Capital to make multibillion-dollar acquisitions of
semiconductor companies, people familiar with the matter say.
The delay could end up quash Qualcomm's planned $44 billion
acquisition of Dutch semiconductor company NXP Semiconductors NV, a
deal widely seen as critical to Qualcomm's future, according to one
person familiar with the matter.
China is the only country that has not yet signed off on that
deal, along with Toshiba Corp.'s planned $19 billion sale of its
chip unit to a consortium led by U.S. private-equity firm Bain
Capital. Neither deal is likely to move forward amid the looming
trade war, the people said.
"The review process is basically on pause because of the trade
tension," a senior Toshiba official said. "We've been afraid of
that."
Stalling these deals is another possible leverage point for
China as it seeks to fend off the Trump's administration's plans to
impose tariffs on up to $150 billion in Chinese goods in response
to what it says are unfair trade practices.
China has denied acting improperly and responded with threats of
what it calls "teeth-to-teeth" retaliatory measures that include
slapping higher levies on $50 billion in U.S. imports.
The NXP deal is considered critical for Qualcomm to improve its
competitiveness by expanding its lineup of semiconductors to
include chips for the automotive industry, security, and a variety
of connected equipment known as the Internet of Things.
Worried that Beijing would scuttle the deal, Qualcomm Chief
Executive Steve Mollenkopf raised the issue in a March 27 meeting
with China's vice president, Wang Qishan, people with knowledge of
the event said.
Mr. Wang sought to offer some assurances, the people said,
telling Mr. Mollenkopf that regulators would review the deal
through a "science-based process" and that politics would have
nothing to do with it.
But people familiar with the matter say San Diego-based Qualcomm
is facing resistance from China's Commerce Ministry, which has
indicated that it will likely seek more information from Qualcomm
for the NXP deal.
The Commerce Ministry faces a deadline next week to make a
decision on the Qualcomm-NXP tie-up, according to one of the
people. To keep the review alive, the companies could withdraw the
current application and refile for an extension.
But Qualcomm also faces an April 25 deadline to complete its
purchase of NXP.
For Qualcomm, diversifying its business portfolio by acquiring
NXP was viewed as key for its growth, as its primary market of
mobile handsets has reached a plateau. The deal is an important
part of Qualcomm's plan for revenue growth after the Trump
administration last month quashed a $120 billion proposed
acquisition by Broadcom Ltd. of Qualcomm -- an outcome Qualcomm
wanted.
For Toshiba, the longer it takes to sell the chip business, the
higher the risk of losing its technological edge, as to keep up the
competitiveness it must frequently make multibillion-dollar
investments, a challenge for Toshiba with its unsteady
finances.
As of April 1, Toshiba gained the right to cancel the deal with
the Bain-led consortium under the original sale contract. Toshiba
executives have said they want to go through with the deal, but
some shareholders have said it should be scrapped. A lengthy delay
in China would increase that likelihood.
Toshiba's financial situation has improved since getting
hammered last year by the bankruptcy of U.S. subsidiary
Westinghouse Electric Co., and a delay in the sale might even give
Toshiba a chance to negotiate a higher price to reflect the latest
market values. But further delay also means it will take longer for
Toshiba to again compete against rivals, including Samsung
Electronics Co.
Qualcomm didn't immediately respond to comment. NXP referred any
questions to Qualcomm, its acquirer. A Bain representative declined
to comment on the Toshiba deal. China's Commerce Ministry didn't
respond to a request for comment.
Washington and Beijing have been embroiled in a trade spat that
has become a key source of financial-market turbulence in recent
weeks and raised concerns about a full-bore trade war that could
drag down the global economy.
Having already tightened scrutiny of inbound deals from China,
U.S. officials are also crafting sharp prohibitions on Chinese
investment in advanced U.S. technology, taking aim at China's
practice of using state subsidies to foster Chinese dominance of
future frontiers of manufacturing.
Beijing, for its part, has blamed the U.S. for wrecking the
global trade order and is campaigning to line up support from other
countries, especially in Europe, whose companies could be given
better access to China's markets should China react to stepped-up
pressure from Washington by retaliating against the U.S.
So far, China has threatened to impose stiff levies on U.S.-made
soybeans, sorghum and other products, mainly from the Farm Belt
states that helped Mr. Trump win the election in 2016. It is also
looking for retaliatory options beyond tariffs, government advisers
and China analysts say, such as stepped-up regulation of American
companies operating in China.
Putting off approvals of cross-border deals that could benefit
U.S. firms is bound to further rattle policy makers in Washington
as the two sides enter the next phase of high-stakes dance.
"Merger reviews and decisions should be based on consistent,
scientific, market-based calculations and never the politics of
U.S.-China relations, " said Jacob Parker, vice president of China
operations at the U.S.-China Business Council.
Kosaku Narioka in Tokyo contributed to this article
Write to Lingling Wei at lingling.wei@wsj.com, Yoko Kubota at
yoko.kubota@wsj.com and Takashi Mochizuki at
takashi.mochizuki@wsj.com
(END) Dow Jones Newswires
April 13, 2018 10:19 ET (14:19 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.