Microchip and Qualcomm logos displayed on a phone screen are seen in this multiple exposure illustration photo taken in Krakow, Poland on April 10, 2023.
Jakub Porzycki | Nurphoto | Getty Images
Shares of Qualcomm (QCOM) experienced a dip in premarket trading Friday following an announcement from Chinese regulators indicating an investigation into the company’s acquisition of automotive chipmaker Autotalks. The move escalates existing tensions between the U.S. and China, occurring in advance of crucial diplomatic engagements between leaders of both nations slated for later this month.
The stock was trading approximately 3% lower in premarket activity.
China’s State Administration of Market Regulation (SAMR) asserted that Qualcomm is suspected of violating China’s anti-monopoly laws with regard to its acquisition of Autotalks, an Israeli firm specializing in vehicle-to-everything (V2X) communication chips. The acquisition, initially announced over two years ago, was officially completed in June.
SAMR released a concise statement outlining its intention to launch a formal investigation into Qualcomm’s business practices surrounding the acquisition.
Qualcomm did not immediately respond to requests for comment. The company maintains significant business interests in China, supplying smartphone chipsets to major domestic manufacturers such as Xiaomi. This investigation raises concerns about potential disruptions to Qualcomm’s supply chain and its ability to compete effectively in the lucrative Chinese market.
The probe into Qualcomm arrives amidst increasing scrutiny of U.S. technology companies by Chinese regulators, a trend that has amplified geopolitical tensions between Beijing and Washington ahead of anticipated high-level talks. Experts suggest that China’s actions might be interpreted as a strategic maneuver aimed at gaining leverage in ongoing trade negotiations and asserting its regulatory authority over key technology sectors.
Previously, in September, SAMR alleged that Nvidia (NVDA) had potentially contravened anti-monopoly laws concerning its acquisition of Mellanox, focusing particularly on specific agreements made during the acquisition process. Concurrently, reports have surfaced indicating that Beijing is actively dissuading local companies from procuring Nvidia’s advanced AI chips, a move that could hinder the development of AI capabilities within China.
This week also saw China tightening export restrictions on rare earth elements and associated technologies. These rare earths are vital for various high-tech industries, including automotive manufacturing, defense systems, and semiconductor production. The tightened controls could have far-reaching implications for global supply chains and further complicate the U.S.-China trade relationship. This move is seen by analysts as a strategic attempt by China to control key resources essential for technological advancement, potentially giving it an advantage in the global tech race.
U.S. President and his Chinese counterpart are scheduled to meet in person on the sidelines of the Asia-Pacific Economic Cooperation forum, which is to be during the last week of October in Gyeongju, South Korea. The meeting is highly anticipated, with investors and analysts closely watching for any signs of de-escalation in the trade and technology disputes between the two countries. The outcome of the SAMR investigation into Qualcomm could further complicate these discussions and impact future trade relations.
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