China is set to approve Qualcomm Technologies Inc.’s acquisition of NXP Semiconductors N.V. as the Trump administration is reported Sunday to have reached a deal over ZTE Corp. in an apparent thawing of trade relations between the world’s two largest economies.
Qualcomm’s acquisition of Dutch semiconductor manufacturer NXP was first announced way back in October 2016. But given the size of the deal, last reported to be $44 billion, it has faced regulatory approval hurdles along the way. Although the deal has achieved approval from eight out of nine bodies, including the European Union, China was the last holdout.
It may seem strange that the acquisition of a Dutch company by an American one requires approval by the Chinese government. But both companies have substantial manufacturing plants run by local subsidiaries, hence the deal requiring a signoff from China as well.
The approval from China comes as President Trump took to Twitter to suggest that the administration had struck a deal to solve the dispute between the two countries following the imposition of a ban on access to U.S. technology by the Department of Commerce. The ban, imposed on account of accusations that ZTE had breached a previous deal after it was found selling U.S. technology to Iran and North Korea, resulted in the company announcing it was ceasing operations in May 9.
According to Trump, the new deal will see ZTE pay an additional $1.3 billion fine, on top of the $1.19 billion fine it has already paid. It also will implement high-level security guarantees as well as change management and board positions. According to the Associated Press, the deal would see ZTE oust its entire management team and hire American compliance officers.
Although the two stories may appear to be separate, the Financial Times pointed out that both are linked. It quoted a source as saying the “Qualcomm and ZTE developments would ‘clear the decks’ for Chinese and U.S. negotiators to focus their discussions on bilateral trade imbalances and Chinese foreign investment and industrial development policies.”