NXP Semiconductors N.V.; Analysis To Aid Public Comment, 76288-76291 [2015-30894]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 80, Number 235 (Tuesday, December 8, 2015)]
[Notices]
[Pages 76288-76291]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-30894]


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FEDERAL TRADE COMMISSION

[File No. 151 0090]


NXP Semiconductors N.V.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair methods of competition. 
The attached Analysis to Aid Public Comment describes both the 
allegations in the draft complaint and the terms of the consent order--
embodied in the consent agreement--that would settle these allegations.

DATES: Comments must be received on or before December 28, 2015.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/nxpsemiconductorsconsent online or on 
paper, by following the instructions in the Request for Comment part of 
the SUPPLEMENTARY INFORMATION section below. Write ``NXP Semiconductors 
N.V.--Consent Agreement; File No.151-0090'' on your comment and file 
your comment online at https://ftcpublic.commentworks.com/ftc/nxpsemiconductorsconsent by following the instructions on the web-based 
form. If you prefer to file your comment on paper, write ``NXP 
Semiconductors N.V.--Consent Agreement; File No.151-0090'' on your 
comment and on the envelope, and mail your comment to the following 
address: Federal Trade Commission, Office of the Secretary, 600 
Pennsylvania Avenue NW., Suite CC-5610 (Annex D), Washington, DC 20580, 
or deliver your comment to the following address: Federal Trade 
Commission, Office of the Secretary, Constitution Center, 400 7th 
Street SW., 5th Floor, Suite 5610 (Annex D), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Meredith Levert (202-326-2881), Bureau 
of Competition, 600 Pennsylvania Avenue NW., Washington, DC 20580.

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SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing consent orders to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of thirty (30) days. The 
following Analysis to Aid Public Comment describes the terms of the 
consent agreement, and the allegations in the complaint. An electronic 
copy of the full text of the consent agreement package can be obtained 
from the FTC Home Page (for November 25, 2015), on the World Wide Web, 
at https://www.ftc.gov/os/actions.shtm.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before December 28, 
2015. Write ``NXP Semiconductors N.V.--Consent Agreement; File No.151-
0090'' on your comment. Your comment--including your name and your 
state--will be placed on the public record of this proceeding, 
including, to the extent practicable, on the public Commission Web 
site, at https://www.ftc.gov/os/publiccomments.shtm. As a matter of 
discretion, the Commission tries to remove individuals' home contact 
information from comments before placing them on the Commission Web 
site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone's Social Security number, 
date of birth, driver's license number or other state identification 
number or foreign country equivalent, passport number, financial 
account number, or credit or debit card number. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ``[t]rade secret or any commercial or financial information 
which . . . is privileged or confidential,'' as discussed in Section 
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 
4.10(a)(2). In particular, do not include competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept 
confidential only if the FTC General Counsel, in his or her sole 
discretion, grants your request in accordance with the law and the 
public interest.
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    \1\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/nxpsemiconductorsconsent by following the instructions on the web-
based form. If this Notice appears at https://www.regulations.gov/#!home, you also may file a comment through that Web site.
    If you file your comment on paper, write ``NXP Semiconductors 
N.V.--Consent Agreement; File No.151-0090'' on your comment and on the 
envelope, and mail your comment to the following address: Federal Trade 
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW., Suite 
CC-5610 (Annex D), Washington, DC 20580, or deliver your comment to the 
following address: Federal Trade Commission, Office of the Secretary, 
Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610 (Annex 
D), Washington, DC 20024. If possible, submit your paper comment to the 
Commission by courier or overnight service.
    Visit the Commission Web site at https://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding as appropriate. The 
Commission will consider all timely and responsive public comments that 
it receives on or before December 28, 2015. You can find more 
information, including routine uses permitted by the Privacy Act, in 
the Commission's privacy policy, at https://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted from NXP 
Semiconductors N.V. (``NXP''), subject to final approval, an Agreement 
Containing Consent Orders (``Consent Agreement'') designed to remedy 
the anticompetitive effects resulting from NXP's proposed acquisition 
of Freescale Semiconductor Ltd. (``Freescale'').
    On March 1, 2015, NXP and Freescale executed an Agreement and Plan 
of Merger (``Merger Agreement'') pursuant to which NXP will acquire all 
of Freescale's common stock in a transaction valued at approximately 
$11.8 billion (``Acquisition''). The proposed Acquisition would combine 
the two largest suppliers of RF power amplifiers. The Commission's 
Complaint alleges that the proposed Acquisition, if consummated, would 
violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and 
Section 5 of the FTC Act, as amended, 15 U.S.C. 45, by substantially 
lessening competition in the worldwide market for RF power amplifiers.
    Under the terms of the proposed Decision and Order (``Order'') 
contained in the Consent Agreement, NXP is required, no later than ten 
days from the close of the NXP/Freescale transaction, to divest its RF 
power amplifier assets to Jianguang Asset Management Co., Ltd. 
(``JAC''). The divestiture package includes a manufacturing facility, 
manufacturing equipment, intellectual property, and customer and 
supplier contracts. NXP's RF power employees, including the leadership 
of the business, will also transfer to JAC. The Consent Agreement 
provides JAC with everything needed to compete effectively in the RF 
power amplifier market.
    The Consent Agreement has been placed on the public record for 30 
days to solicit comments from interested persons. Comments received 
during this period will become part of the public record. After 30 
days, the Commission will again review the Consent Agreement and the 
comments received, and decide whether it should withdraw from the 
Consent Agreement, modify it, or make it final.

The Parties

    Headquartered in the Netherlands, NXP is a semiconductor developer 
and manufacturer specializing in high performance mixed signal devices 
for a variety of industries. NXP designs, manufactures, and sells RF 
power amplifiers, among other products, through its Secure Interface & 
Power division.
    Headquartered in Austin, Texas, Freescale is a manufacturer of 
stand-alone semiconductors that perform dedicated power usage functions 
in a variety of electronic systems for automotive, networking, 
industrial, and consumer applications. Freescale designs, manufactures, 
and sells RF

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power amplifiers through its Radio Frequency division.

The Relevant Market and Market Structure

    The relevant line of commerce in which to analyze the effects of 
the Acquisition is no broader than RF power amplifiers. RF power 
amplifiers (also referred to as RF power transistors) are high power 
(>1 watt average output power) semiconductors that increase the 
strength of radio signals transmitted between electronic devices. The 
largest application for RF power amplifiers, accounting for roughly 70% 
of revenues, is wireless infrastructure--i.e., cellular base stations 
(cell towers). Other applications include aviation, industrial, 
broadcasting, and non-cellular communications such as land mobile 
radio, as well as potential future applications for cooking and 
lighting. RF power transistors are manufactured using specialty process 
technologies in order to deliver high output power and heat 
dissipation. The two principal technologies are (i) silicon based 
laterally-diffused metal oxide semiconductor (``LDMOS'') and (ii) 
gallium nitride on silicon carbide substrate (``GaN''). LDMOS 
technology accounts for roughly 90% of RF power amplifiers used in 
wireless infrastructure. According to customers and other market 
participants, there are no substitutes for RF power amplifiers.
    The relevant geographic market for RF power amplifiers is 
worldwide. The three major RF power amplifier suppliers (see below) 
manufacture the products in facilities around the world, and ship the 
products from those facilities to customer locations worldwide. There 
are currently no regulatory barriers, tariffs, or technical 
specifications that impede worldwide trade, and transportation costs 
are low.
    The RF power amplifier market is characterized by a limited number 
of suppliers, including Freescale, the largest supplier with 36.6% of 
the market, and NXP, the second-largest supplier with 25.1% of the 
market. Infineon Technologies AG (``Infineon'') is the third largest 
supplier. Freescale, NXP, and Infineon are the only meaningful 
suppliers of LDMOS-based RF power amplifiers. Infineon, however, has a 
significantly smaller RF power portfolio than either Freescale or NXP. 
Several additional companies supply GaN-based RF power amplifiers only, 
but have small market shares.
    The proposed NXP/Freescale combination would cause a moderately 
concentrated market for RF power amplifiers to become highly 
concentrated, increasing the Herfindahl-Hirschman Index from 2,203 to 
4,040 (a delta of 1,837). This increase in concentration far exceeds 
the thresholds set out in the Horizontal Merger Guidelines for raising 
a presumption that the Acquisition would create or enhance market 
power.

Entry

    Entry into the RF power amplifier market is not likely to deter or 
counteract any anticompetitive effects of the proposed Acquisition. 
Entry is unlikely in light of high capital costs, significant switching 
costs by customers, and the considerable time it would take for 
customers to develop trust in a new entrant's products. The same 
barriers would apply to an expansion into LDMOS-based RF power 
amplifiers by companies that currently supply only GaN-based RF power 
amplifiers.

Effects of the Acquisition

    Absent a divestiture, the proposed Acquisition is likely to cause 
competitive harm in the market for RF power amplifiers. NXP and 
Freescale compete directly for RF power amplifier sales, and customers 
benefit from that competition in terms of both pricing and product 
innovation. Customers describe NXP and Freescale as each other's 
closest competitors, and the parties appear to view each other the same 
way. By eliminating the competition between NXP and Freescale, the 
proposed Acquisition likely would lead to unilateral effects in the 
form of higher prices and reduced innovation, particularly in the 
wireless infrastructure segment.

The Consent Agreement

    The Consent Agreement restores the competition lost from NXP's 
proposed acquisition of Freescale by requiring NXP to divest its RF 
power amplifier business to JAC, a Chinese private equity management 
fund. The proposed divestiture includes everything needed for JAC to 
compete effectively in the worldwide market for RF power amplifiers.
    Under the Order, NXP is required, no later than ten days from the 
close of the NXP/Freescale transaction, to divest its RF power 
amplifier assets to JAC. The assets to be divested include a 
manufacturing facility located in Cabuyao (Philippines), a building in 
Nijmegen (the Netherlands) to house management and certain R&D and 
testing labs, all manufacturing and R&D assets used primarily for the 
RF power amplifier business, and customer support equipment. 
Additionally, the divestiture package includes all patents and 
technologies that are exclusively or predominantly used for the RF 
power amplifier business, and a royalty-free license to use all other 
NXP patents and technologies required by that business. Finally, the 
divestiture package includes the transition of NXP's RF power amplifier 
employees, including the complete management team, to JAC.
    The manufacturing assets in the divestiture package include NXP's 
RF power amplifier back-end manufacturing assets (including the portion 
of the Philippines facility dedicated to these products) but not its 
front-end manufacturing assets. Instead, JAC will outsource its front-
end manufacturing to a third-party wafer foundry. In the interim, the 
Order requires that, at the request of JAC and in a manner approved by 
the Commission, NXP must provide front-end wafer manufacturing for a 
period of up to sixty months. Similarly, the Order also requires NXP to 
provide support services such as logistical and administrative support 
for a period of up to thirty-six months.
    In addition, the Order includes other standard terms designed to 
ensure the viability of the divested business. NXP must assist JAC in 
hiring the existing work force of NXP's RF power amplifier business, 
and must refrain from soliciting those employees for two years. A 
Monitor will oversee NXP's compliance with the obligations set forth in 
the Order. If NXP does not fully comply with the divestiture and 
requirements of the Order, the Commission may appoint a Divestiture 
Trustee to divest the RF power amplifier assets and perform NXP's other 
obligations consistent with the Order.
    Given the robustness of the divested business and the protections 
contained in the Order, the divestiture of NXP's RF power amplifier 
assets to JAC is likely to preserve competition. Potential customers 
have confirmed that the divested assets include everything necessary to 
compete effectively as a viable business. Similarly, potential 
customers have confirmed that JAC would be a workable option as a 
supplier.

Opportunity for Public Comment

    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement to aid the Commission in determining whether it 
should make the Consent Agreement final. This analysis is not an 
official interpretation of the proposed Consent Agreement and does not 
modify its terms in any way.


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    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2015-30894 Filed 12-7-15; 8:45 am]
BILLING CODE 6750-01-P