Qualcomm wouldn’t be wise to give up on the prospect of acquiring Dutch NFC pioneer NXP Semiconductors, Morgan Stanley analysts believe, having written as much in their latest note to investors. Recent reports indicate that Qualcomm may drop its July 25 deadline for merging with NXP as it’s still waiting for approval from China’s antitrust watchdog that likely won’t come by that date, though the Eindhoven-based technology company is unlikely to walk away from the deal.
Morgan Stanley remains adamant that despite all of the legal issues surrounding the proposed merger and the ongoing trade war between the United States and China, NXP remains Qualcomm’s most promising avenue toward diversified growth. The San Diego, California-based chipmaker is presently heavily reliant on smartphone industry revenues that are likely to start eroding as major clients such as Apple are now threatening with dropping it unless it lowers its patent licensing fees, something it already did to a degree earlier this year. While the firm was close to securing an approval of its proposed tie-up from Beijing, the massive tariffs Washington ended up imposing earlier this month additionally complicated the situation and it’s presently unclear what China’s next move is going to be.
Acquiring NXP would provide Qualcomm with a much larger foothold in the automotive segment, in addition to providing it with technological assets necessary for a major IoT push. Qualcomm also heavily invested in the fifth generation of mobile networks that’s expected to revolutionize the global economy and is generally looking beyond smartphones in regards to any significant investments it’s considering moving forward. China is the only remaining country that has yet to approve the proposed consolidation with NXP which was announced in late 2016. Should the chipmaker drop the deal, some shareholders may push for a major management shakeup at Qualcomm, Morgan Stanley’s industry watchers believe.