Brief Korea: Apple Settles With Qualcomm As Intel Throws In The Towel On 5G Smartphone Modems and more

In this briefing:

  1. Apple Settles With Qualcomm As Intel Throws In The Towel On 5G Smartphone Modems
  2. Nexon:  Deal Structure, Valuations, Question Marks
  3. Nexon Sale: Main Bidding on May 15, NXC Stake Up for Sale & No Mandatory Tender
  4. China’s New Semiconductor Thrust – Part 3: Market Size and Impact to Competition
  5. Korea Interest Rates – Next Move Down

1. Apple Settles With Qualcomm As Intel Throws In The Towel On 5G Smartphone Modems

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On the very first day of the landmark jury trial between Apple and Qualcomm over long-running patent licensing issues, the two companies quietly announced that they had reached a settlement.  Significantly, the deal included a chipset supply agreement in addition to the patent licensing accord.

On the very same day, Intel, who had stepped up to supply Apple with modem chips during its protracted dispute with Qualcomm, announced that it was exiting the 5G smartphone modem business upon completion of its current contractual commitments on 4G modems. The move is an embarrassing climb-down for Intel, eerily reminiscent of similar retreats from smartphone and tablet SOC markets in recent years, proving once again that when the going gets tough, Intel… throws in the towel. 

2. Nexon:  Deal Structure, Valuations, Question Marks

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I have been somewhat reticent to add to the written discussion on Nexon Co Ltd (3659 JP)‘s possible change of control due to the sale of Founder Kim Jung-Ju’s personal holding company NXC Corp because there has been so little consistency to the news which comes out. 

Numbers fly around but there are no references to what they mean or include. Originally first round was in mid-Feb, but that got extended, then it looked like a number of the players simply dropped out, or were demoted to side players. Then it looked like there was a question of whether a buyer would buy NXC or buy the Nexon shares. There were a couple of articles a couple of weeks ago from the Korean press suggesting buying NXC was going to prove “too difficult.”

There are a lot of reasons for that. 

Then today an article in the Korea Economic Daily came out and suggested that a) the deal was still for NXC, not Nexon shares, and b) NXC and its bankers had received an opinion from the Tokyo Stock Exchange that a Tender Offer for Nexon shares would not be mandatory. 

Hmmm…

3. Nexon Sale: Main Bidding on May 15, NXC Stake Up for Sale & No Mandatory Tender

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One of Korea’s largest local economic newspapers, The Korea Economic Daily, reports that Nexon’s main bidding will take place on May 15. It also reports that it is the Kim Jung-ju family’s NXC stake to be put up for sale. As for tender, TSE advises in a written opinion that there will be no mandatory tender as a result of NXC stake sale. That is, tender will be optional.

4. China’s New Semiconductor Thrust – Part 3: Market Size and Impact to Competition

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China’s current efforts to gain prominence in the semiconductor market targets memory chips – large commodities.  This three-part series of insights examines how China determined its strategy and explains which companies are the most threatened by it.

This third part of the series  sizes the  market and projects the impact on existing suppliers.

5. Korea Interest Rates – Next Move Down

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We expect interest rates will be declining by the end of the year. BoK Governor Lee Ju-yeol is running out of excuses not to ease monetary policy. Inflation is trending down and is below the central bank’s 2% target. Household borrowing has been slowing for months while the Korean economy is rapidly losing growth momentum. Lower rates will bring little relief however. The outlook is dim. We reiterate our underweight call on Korean equities.

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