China seen giving close scrutiny to merger of Qualcomm, Broadcom

A potential mega-merger between chipmaker Broadcom and US rival Qualcomm Inc is likely to face stern scrutiny in China, antitrust lawyers said, amid a strategic push by the Chinese government into semiconductors.

Broadcom made an unsolicited $103 billion bid for Qualcomm on Monday, aimed at creating a $200-billion-plus behemoth that could reshape the industry at the heart of mobile phone hardware.

But Chinese regulatory approval could be a hold-up.

China and the US have sparred over technology deals, including in chips, with the Committee on Foreign Investment in the United States (CFIUS) knocking back a number of takeovers involving Chinese companies this year.

The merger would face a lengthy review from the anti-monopoly unit of China's Ministry of Commerce (MOFCOM), due to strategic concerns, the huge size of the deal and because Qualcomm has come under fire before in the country over competition concerns.

"This is a critical industry for China and Qualcomm has been fined by the MOFCOM before so it's on its radar," said Wendy Yan, a Shanghai-based partner at law firm Faegre Baker Daniels.

Qualcomm agreed to pay a record fine of $975 million in China in 2015 to end a probe into anti-competitive practices related to so-called double dipping by billing Chinese customers patent royalty fees in addition to charging for the chips.

China is making a major push to develop its own semiconductor industry under local champions such as Beijing-based Tsinghua Unigroup and Fujian Grand Chip Investment Fund to help cut reliance on global operators including Qualcomm, Samsung Electronics Co and Intel Corp.

"The [MOFCOM] will consider industry security for the whole country, as the semiconductor industry has strategic importance to China," a second Shanghai-based antitrust lawyer said.

He asked not to be identified because Qualcomm was a client of his firm.