Qualcomm Faces Antitrust Investigation in China; Bloomberg: A Strategic Move Ahead of U.S.-China Meetings

TradingKey - On October 10, China's State Administration for Market Regulation (SAMR) announced an official investigation into Qualcomm, citing the company's failure to report its acquisition of Israeli automotive chipmaker Autotalks, potentially violating China's Anti-Monopoly Law. As a result, Qualcomm's stock (QCOM) dropped nearly 3% in pre-market trading on Friday.

Qualcomm completed its acquisition of Autotalks in June this year. Autotalks specializes in V2X communication, producing chips designed to reduce vehicle collisions.

Bloomberg analysts suggest that this move by China is aimed at gaining leverage in the upcoming U.S.-China meetings, as their trade ceasefire agreement is nearing expiration.

This week, China unveiled comprehensive new export control measures on rare earths and related technologies. Concurrently, the U.S. plans to impose millions of dollars in fees on Chinese vessels docking at American ports. Additionally, U.S. officials have proposed banning Chinese airlines from flying over Russian airspace and have advocated for broader restrictions on the export of chip-making equipment to China.

Later this month, the leaders of both nations will attend the Asia-Pacific Economic Cooperation (APEC) summit in South Korea. The tariff truce between the two countries is set to expire on November 10, following a period where U.S. tariffs on Chinese goods reached as high as 145%. The antitrust investigation against Qualcomm introduces further uncertainty to the upcoming summit and subsequent tariff negotiations.

Julian Evans-Pritchard, Head of China Economics at Capital Economics, highlighted that while this aggressive stance might yield benefits, it also risks complicating the negotiations between China and the U.S.

Furthermore, some analysts believe China's actions signal an escalation in the tech war between the two countries. Last month, China launched a similar antitrust investigation into NVIDIA's 2020 acquisition of Mellanox. This is not Qualcomm's first encounter with China's antitrust regulations; the company was fined $975 million by China in 2015 for monopolistic behavior, marking the largest penalty ever imposed on a foreign company in China.