ANNUAL REPORT

Table 1:
160
Chinese Attempted and Completed Acquisitions and Investments
in U.S. Semiconductor Companies, 2015–2016—Continued
U.S. Target
Specialty
Chinese
Investor
Value
(US$
millions)
Status
Analogix
Semiconductor
Designer of highspeed,
mixed-signal
chips for use
in high-performance
displays
such as mobile
devices, virtual
and augmented
reality, and other
products
Beijing
Shanhai
Capital
Management,
National IC
Industry
Investment
Fund
$500 Announced
merger,
September 2016
dkrause on DSKHT7XVN1PROD with USCC
Sources: Various. 165
Beyond significant investment, Mr. Goodrich outlined additional
policies impacting U.S. semiconductor firms’ operations in China:
government-funded R&D grants, state-guided procurement orders,
technology transfer requirements, China-specific standards, cybersecurity
trade barriers,* encryption limitations, and security testing
and licensing. 166 These policies support domestic firms while
limiting U.S. semiconductor firms’ market access to their largest
customer. In order to gain and maintain market access, U.S. and
other foreign firms appear to be acceding to Chinese demands to
transfer technology and form joint ventures with its firms. Recent
examples of China leveraging market access in exchange for technology
include:
Qualcomm: In February 2015, the National Development and
Reform Commission, China’s chief industrial policymaking agency
and regulatory body, fined Qualcomm—the world’s largest producer
of smartphone chips—$975 million for allegedly using its dominant
market share to overcharge Chinese telecommunications firms for
its patent royalties.† This fine was the largest penalty ever imposed
on a company by the Chinese government. 167 In addition to
paying the fine, Qualcomm agreed to offer 3G and 4G licenses at
a lower price in China than Qualcomm’s normal wholesale figure.
Moreover, Qualcomm would provide these licenses separately from
its other patents and permit existing licensees to take advantage
of the new sales terms in January 2015. Qualcomm also agreed to
no longer require chip customers to sign a licensing agreement
with ‘‘unreasonable conditions,’’ as determined by the National Development
and Reform Commission, prior to the sale of baseband
chips. 168
Qualcomm, reliant on the Chinese market for nearly half its revenue,
169 launched a ‘‘globalization’’ unit in May 2015 to assist Chinese
smartphone makers—such as Huawei and Xiaomi—in expand-
* For more information on the impact of China’s cybersecurity barriers on U.S. firms, see U.S.-
China Economic and Security Review Commission, Chapter 1, Section 4, ‘‘Commercial Cyber Espionage
and Barriers to Digital Trade in China,’’ in 2015 Annual Report to Congress, November
2015, 210–217.
† For more information on the antimonopoly case, see U.S.-China Economic and Security Review
Commission, Chapter 1, Section 2, ‘‘Foreign Investment Climate in China,’’ in 2015 Annual
Report to Congress, November 2015, 96–97.
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