Qualcomm Cutting Jobs while in the Eye of U.S.-China Storm

By Joyce Yu

Philadelphia, PA–Qualcomm is reducing more than 1,500 jobs across California as the chip maker is experiencing headwinds at a time of escalating trade tensions between Beijing and Washington.

As of September, It had 33,800 employees worldwide, according to its website. The San Diego-based chipmaker said the cuts are part of a $1 billion cost-reduction plan that it announced in January, but declined to say how many people it currently employs or how many people it’s laying off outside California.

“We concluded that a workforce reduction is needed to support long-term growth and success, which will ultimately benefit all our stakeholders,” the spokesperson said in a statement.

Sino-U.S. trade tensions have escalated in recent days with focus in the technology sectors. China is holding up Qualcomm’s $44 billion proposal to purchase its rival NXP Semiconductors, a deal aimed at helping it diversify away from dependence on the slowing mobile-phone market and into growth spots like automotive and the so-called “Internet of Things.” China’s antitrust regulator said Thursday a preliminary review of the transaction has found “issues that are hard to resolve.” China is the only country that hasn’t yet approved the deal. The two companies said Thursday that they have refiled the application, extending the deadline to complete the deal by three months to July 25.

The European Commission also raised concerns over Qualcomm’s latest acquisition plan but was satisfied after Qualcomm pledged to ensure its chips will function with those of its competitors for eight years. An earlier takeover attempt of Qualcomm by Singapore-based Broadcom last month was blocked by the Trump administration due to concerns that deal would undermine U.S. strength in the race against China in 5G, the next-generation mobile network.

A Wall Street Journal report notes that China seldom blocked mergers of non-Chinese companies outright. Still, this rare high-profile comment on a pending deal indicates Beijing is prepared to take the transaction hostage as it negotiates with the U.S. on trade and market access. In addition, this comes after the U.S. government this week banned American firms from selling goods to China’s telecom-equipment maker ZTE, a Qualcomm customer. That ban has put ZTE, one of China’s biggest tech companies, in a precarious situation and exposed China’s broader reliance on foreign chips.

As the biggest consumer of semiconductors, China’s smartphone makers are big its buyers of chips from both Qualcomm and NXP. Qualcomm generates 65% of its revenue in China.

Daniel H. Rosen, a partner at the research firm Rhodium Group, told the New York Times that policymakers worldwide are just now discovering that using foreign technology creates vulnerabilities that have outpaced governments’ ability to manage them.

“This is not just a China-U.S. phenomenon, but a matter of things which just a few years ago we thought were relatively benign now being weaponized in ways that we haven’t anticipated,” he said.


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