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Qualcomm-NXP merger killed by China



 Qualcomm office san jose

A $ 44 billion tech deal has just become the latest casualty in the escalating US-China trade tensions.

Qualcomm has been waiting for nearly two years for its purchase of Dutch chipmaker NXP to clear global regulatory hurdles. The massive deal, first announced in October 2016, had been approved by regulators in eight other jurisdictions, including the European Union and South Korea. China was the lone holdout.

The final deadline for the agreement was midday Thursday in China ̵

1; and Beijing's Ministry of Commerce. Qualcomm ( QCOM ) had this happen. CEO Steve Mollenkopf said during a call, he said, "Qualcomm's deal with NXP, the company would walk away from it." .

Continued uncertainty surrounding a large deal "introduces heightened risk," Mollenkopf said. "We weigh that risk against the likelihood of a change in the current geopolitical environment, which we did not believe was a high-probability outcome in the near future."

The San Diego-based company, which employs more than 33,000 people, is now stuck with paying NXP a $ 2 billion breakup fee.

NXP did not immediately respond to a request for comment outside of business hours.

This is just the latest blow for Qualcomm, which has been in the process of making its dealings with the United States and China. The tech industry has become a key battleground in the trade between the world's two largest economies.

Related: Do trade wars hurt business? Ask Qualcomm

In March, President Donald Trump blocked a $ 117 billion takeover of Qualcomm by rival Broadcom [ AVGO ) arguing that it could help China beat the United States is developing 5G technology.

The following month, the trump administration is being imposed on Chinese smartphone and telecommunications company ZTE.

Qualcomm: As a major supplier of chips for ZTE's smartphones, Qualcomm lost a significant amount of money during the three-month ban, and then got caught in the fate of ZTE's survival.

After the US government struck a new deal, ZTE to resume business with American companies, there was hope that Beijing would approve the Qualcomm NXP deal.

But then the United States imposed tariffs on Chinese goods worth $ 34 billion last month, citing alleged Chinese theft of US intellectual property as justification. China responded in kind. President Donald Trump then threatened to target an additional $ 200 billion worth of Chinese products.

China is thus failing to develop a competitive chip industry and decreasing its reliance on foreign chip suppliers.

The Qualcomm-NXP deal would "bring negative impacts on a broad range of industries in China," said JH Lin, analyst with research firm Trend Force.

Qualcomm would have also strengthened its technological know-how, which would "be a huge challenge or even risk for Chinese chipmakers and the domestic semiconductor industry of China," Lin added.

CNNMoney (Hong Kong) First published July 26, 2018: 12:31 AM ET

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