US-China trade tensions and semiconductors
There’s been a lot of trade tension lately between the United States and China (FXI) after President Donald Trump took some active measures against China. He imposed tariffs on Chinese imports in March in order to reduce the $375 billion trade deficit the United States has with China and protest companies that are going against the Asian nation’s technology policies.
The Wall Street Journal reported that China and the United States have started negotiating and have agreed to lower foreign investment restrictions on US companies. China has agreed to purchase more semiconductors from the United States. Several media reports stated that China would shift its chip purchases from South Korea and Taiwan to the United States.
That situation works in China’s favor since the nation’s overall semiconductor imports would remain the same, and it would be able to negotiate with the United States.
US-China trade tensions impact semiconductor takeover deals
China is also in a favorable position to approve or not approve two major semiconductor acquisitions: Qualcomm’s (QCOM) proposed $44 billion acquisition of NXP Semiconductors (NXPI) and the Bain Capital–led consortium’s proposed $19 billion acquisition of Toshiba’s (TOSBF) memory chip business.
A separate report by The Wall Street Journal, citing people familiar with the matter, reported that Chinese regulators have slowed down their reviews of these two major takeover deals amid rising trade tensions with the United States. That has forced Qualcomm to refile for regulatory approval, giving China more time to approve the deal. If China refuses the deal, it could hurt Qualcomm’s efforts to dominate 5G (fifth-generation) wireless technologies.
Things are heating up between the United States and China with the introduction of bans. It’s adding to Qualcomm’s troubles since it earns more than 65% of its revenue from China and is relying heavily on the Asian nation for 5G deployment. We’ll take a look at these bans in the next part of this series.
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