Qualcomm terminated its agreement to acquire European chip vendor NXP Semiconductors for $44 billion after the deadline to complete the deal passed Wednesday without approval from China's Ministry of Commerce.
Qualcomm had extended the deadline several times in the nearly two years since the deal was first announced, but said earlier in the day Wednesday that it would not extend the deadline again.
"The decision for us to move forward without NXP was a difficult one," said Steven Mollenkopf, Qualcomm's CEO, in a conference call with analysts Wednesday. "Continued uncertainty overhanging such a large acquisition introduces heightened risk. We weighed that risk against the likelihood of a change in the current geopolitical environment, which we didn't believe was a high probability outcome in the near future."
Qualcomm said it would pay NXP a $2 billion "break up fee," as stipulated in the agreement.
China's Ministry of Commerce — often referred to as MOFCOM — never formally rejected the proposed acquisition, but did not approve it by Wednesday's deadline. Qualcomm and NXP agreed in April to withdraw and refile notice of the acquisition with MOFCOM at the ministry's request.
MOFCOM's inaction on the Qualcomm-NXP acquisition has been characterized by observers as a consequence of tensions between the U.S. and China, which have in recent weeks erupted into an all-out trade war.
The Trump Administration earlier this month enacted a 25% tariff on about $34 billion worth of imports from China and is moving to enact the same tariff on another $16 billion worth of Chinese imports. The Administration has also proposed adding an additional 10% tariff on another $200 billion worth of imports from China. China has enacted reciprocal tariffs on U.S. imports and has said it will match any tariffs enacted by the U.S. with additional tariffs of its own.
Economic tensions between the U.S. and China were also escalated by a ban imposed by the U.S. on selling components to Chinese communications equipment ZTE which nearly put ZTE out of business. However, the U.S. lifted the ban at the direction of U.S. President Donald Trump in what was an apparent gesture of goodwill amid negotiations on a possible trade deal between the world's two largest economies.