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Commentary on MOFCOM’s Conditional Approval of NXP’s Acquisition of Freescale

Author::Michael Gu浏览次数: Jan 5,2016

Authored by Mr. Michael Gu (Partner at AnJie Law Firm

Introduction

On 27 November 2015, the Ministry of Commerce (“MOFCOM”) granted clearance to the proposed acquisition of Freescale Semiconductor Inc. (“Freescale”) by NXP Semiconductors N.V. (“NXP”). This is the second conditional clearance case in the 2015 merger review.

NXP is a global semiconductor firm mainly engaged in the design, manufacture and sale of integrated circuits (ICs) and discrete components. Its products are used in various sectors, including the automotive, wireless network infrastructure, lighting, mobile, consumer and computer industries. The target company, Freescale, is mainly engaged in the manufacture and R&D of microcontrollers and digital networking processors (embedded processors). Freescale also provides customized semiconductor products to clients to complement its embedded processing solutions.

After conducting detailed analysis of the impact the concentration of undertakings may have on the relevant product markets, MOFCOM established that the proposed deal could eliminate or restrict competition in the radio frequency (RF) power transistor product market. MOFCOM comprehensively evaluated the remedies submitted by NXP, which includes the divestment of NXP’s RF power transistor business, and eventually granted conditional clearance to the proposed acquisition of Freescale based on NXP’s commitments. This is the only conditional clearance case granted by MOFCOM in the last three years, with the condition that the parties adopt the structural remedy of divesting business that may have negative effects on competition in the relevant market. As this deal involves a global notification, it obtained conditional approvals from the European Commission (EU) on 17 September 2015, as well as from the Korean Fair Trade Commission (KFTC) on 23 November 2015. The remedy submitted to MOFCOM by NXP is quite similar to that submitted to the EU and KFTC. This is, to a large extent, due to the fact that the geographical markets of the relevant products, which drew the attention of anti-monopoly authorities in different jurisdictions, are defined as the global market. This also indicates that MOFCOM’s anti-monopoly review and law enforcement practices are becoming more in line with international practice.

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