How China's attitude determines the future of the domestic semiconductor industry

Column:Industry Trends Time:2018-02-01

Recently, Qualcomm's acquisition of NXP semiconductor with us $38 billion was approved by the EU antitrust regulatory authority. In addition to the approval of the Korean Fair Trade Commission, Qualcomm has obtained 8 of the 9 market regulatory authorities in the countries or regions that need to obtain antitrust approval. China has not yet made a final decision. Obviously, China's Ministry of Commerce has realized the impact of this matter on China's semiconductor industry and needs to handle it prudently.

It is not difficult to see that even the eight countries and regions that have already been released do not agree to it simply because they are not interested. The European Union accepted the acquisition with attached conditions and issued a fine of 997 million euros shortly after agreeing.

The external public opinion and the industry are generally worried about what choice China will make in the end. Some industry experts said that if Qualcomm successfully acquired NXP, the monopoly situation of Qualcomm's smart phone industry will reappear in the Internet of things, smart cars and other fields in the future, which will form new constraints on the development of China's mobile phone industry, semiconductor industry and many emerging industries.

Patent licensing fees, Qualcomm is not satisfied with only collecting smart phone wool

Qualcomm's acquisition of NXP is the largest transaction in the history of the semiconductor industry. At the same time, this transaction also triggered panic among enterprises in the industrial chain, worried that monopolizing the market would affect their future survival. This worry comes from Qualcomm's "no patent authorization, no chip sales" wool collection charging mode.

For a long time, relying on its market monopoly position, Qualcomm has forced downstream mobile phone manufacturers to pay huge patent fees by taking advantage of the threat of intellectual property rights and chip supply interruption. According to data, Qualcomm's three main businesses include CDMA Technology Group (mainly responsible for R & D and sales of chips), technology licensing department and strategic investment business, of which two-thirds of its profits are from patent licensing.

Up to now, stories about Qualcomm's influence on China's mobile phone industry by relying on its strong patent reserves and business model in the mobile communication field are often mentioned. Last year, it was reported that the launch of Xiaomi 6 was delayed due to the insufficient supply of Qualcomm's snapdragon processors, and the products of many domestic manufacturers, especially flagship models, were greatly affected by Qualcomm's chip capacity.

If this merger is concluded, the adverse effects of Qualcomm abusing its monopoly position, charging high patent fees, extorting and crowding out competitors will extend from smart phones to more industries such as semiconductors, Internet of things, Internet of vehicles and mobile payment, where NXP dominates the market.

Acquire NXP, Qualcomm seeks comprehensive "domination" in the 5g Era

The characteristic of the information and communication industry is to realize interconnection, which makes all parties in the ICT industry strictly follow the unified international standards. At present, the 5g international communication standard is being formulated. As we all know, all major manufacturers will deploy a large number of patents under the submitted 5g standard proposal. Once the standard proposal is approved and becomes a formal standard, the necessary patents based on the standard will gain huge benefits and market dominance in the 5g era.

According to Qualcomm's prediction, the patent revenue in 2020 will reach US $10 billion, but its patent fee in the fourth quarter of last year was only US $1.2 billion. Against the backdrop of the slowing growth of the global smartphone market, it is an inevitable choice for Qualcomm to continue to maintain its monopoly position in the 5g era in order to achieve the goal of $10 billion in patent fees. Qualcomm is currently the world's largest smartphone chip manufacturer, and NXP is not only the world's largest vehicle chip manufacturer, but also the company that has applied for the most Internet of things technology patents in Europe and ranks among the top in the Internet of things chip patents. This is why Qualcomm will not hesitate to invest heavily in acquiring NXP before the 5g era.

Compared with the 3G era, the number of patents Qualcomm owns in the 5g field is gradually decreasing, which means that the opportunities for Chinese enterprises are increasing. Once NXP is acquired, it can provide strong support for Qualcomm's much-needed technological breakthroughs and patent standardization in the Internet of things, the Internet of vehicles, automotive electronics and other fields. Correspondingly, the situation that China's relevant industries are excessively dependent on and controlled by us chip companies will further deteriorate. As a result, important industries such as 5g, Internet of things, Internet of vehicles and "new cars" will bear heavy shackles and risks and lose important strategic "windows".

The United States has regarded China's rise in the semiconductor field as a "threat", so it has blocked and blocked the establishment of China's core capabilities in the semiconductor field in an all-round way. In September 2017, trump rejected the acquisition of lattice semiconductor by canning bridge capital with Chinese background. On the other hand, American industry giants like Qualcomm are actively planning the future through mergers and acquisitions. Industry experts said that if Qualcomm's acquisition of NXP is reached, not only will the effect of China's massive investment in the semiconductor industry be greatly reduced, but also the industrial risk will affect the national strategic security.