Smartphone semiconductor firm and all-round mobile patents king Qualcomm Inc. is prepared to compromise with European Union regulators in order to seal the deal on its proposed acquisition of Dutch firm NXP Semiconductors NV.
The $38 billion acquisition, announced in October 2016, has been beset by delays as Qualcomm has this year been embroiled in a number of legal cases regarding its alleged unfair business practices over its patent licensing model. The most high-profile of these cases involves Apple Inc., which uses Qualcomm’s mobile networking chips in its iPhones and iPads.
One of Qualcomm’s main sources of revenue is from the standards-essential patents and Near Field Communication patents it owns, which are used by almost every smartphone maker on the planet, for a fee of course.
In January, Apple sued Qualcomm in multiple jurisdictions for allegedly taking advantage of its dominant position in this segment to charge excessive fees. These lawsuits eventually prompted the U.S. Federal Trade Commission to open a case of its own against the chip maker with the backing of rivals Intel Corp. and Samsung Electronics Co. Ltd.
The European Commission then announced in June that it had concerns about Qualcomm’s proposed NXP buyout. Back then it said it was worried that Qualcomm might exploit the acquisition to harm its competition and unfairly raise prices, and promptly launched an investigation to ensure that isn’t allowed to happen.
According to the Commission’s web page that tracks the progress of the acquisition, Qualcomm apparently filed “commitments” on Oct. 5 to allay those fears, though no details are given.
However, Fortune Tuesday reported that Qualcomm’s filing relates to patent enforcement. Qualcomm is apparently saying it won’t take over ownership of NXP’s patents, but will instead offer these to an alternative buyer. Qualcomm has also promised not to sue third parties in Europe over the NFC patents it currently holds, except for “defensive” purposes, Fortune said. In addition, Qualcomm has pledged that it will enable interoperability for other companies with NXP’s products.
The apparent concessions suggest that Qualcomm is desperate to get this deal done, and that it knows it has to bend over backwards to do so. The company hasn’t had much luck with its patent litigation suits over the years.
Just today it was slapped with a massive $773 million fine by Taiwan’s Fair Trade Commission after being found guilty of overcharging for its mobile phone chips and patents in that country. Previously, the company was hit with heavy fines in China and also in South Korea. “It abused its advantage in mobile communication standards, refused to license necessary patents,” the Taiwanese body said.
The latest fine will surely sting, but Qualcomm would be in a good position to bounce back if the NXP deal gets done. By acquiring the Dutch firm, Qualcomm would gain a considerable stranglehold over the automotive market – a segment that NXP, the fifth-largest semiconductor maker in the world, currently dominates.
The ball is now in the European Commission’s court, and it’s likely to respond to Qualcomm’s proposal within the few days.