How Will the Taiwan FTC Look at the Skyworks-Qorvo Merger Case?
In the end of 2025, Skyworks (Nasdaq: SWKS) and Qorvo (Nasdaq: QRVO), announced they have entered into a definitive agreement for merger, which appears to be a milestone for the U.S. semiconductor industry with a combined enterprise value of approximately USD 22 billion. Both Skyworks and Qorvo are pure-play radio frequency ("RF") front-end suppliers, collectively occupying around as high as 30% RF market. More than that, accroding to the news, Skyworks and Qorvo supply around 40% of Apple's RF front-end module content. So, the Skyworks and Qorvo merger has already brought lots of attention to the semiconductor industry and the antitrust authorities worldwide. Will the Taiwan Fair Trade Commission ("FTC") approval be required for the Skyworks–Qorvo merger? The answer probably is YES, because highly likely it has already passed the Taiwan regulatory threshold, initiating the merger control review in Taiwan.
Threshold for Initiating the Taiwan Merger Control Review
(1) Market Share: When the enterprises' market share will reach 1/3 (33.33%) because of the merger, OR, when one of the enterprises involved in the merger occupies the market share at no less than 25%, it requires the Taiwan FTC's approval. Here, Qorvo seems to have market share of 15%, and Skyworks seems to have the same market share. That being said, the market share threshold might has not been reached yet. However, we all know that 30% market share is very close to 33.33% threshold. If there is any minor change on the recent RF market, the Skyworks-Qorvo merger will meet the threshold very easily.
(2) Sales Amount: Skyworks's 2024 annual report shows that its sales amount was USD 4,178,000,000 in 2024, including USD 317,000,000 in Taiwan; Qorvo's 2024 report shows that its sales amount was USD 3,769,000,000 in 2024, including USD 260,000,000 in Taiwan. The global sales amount of Skyworks and Qorvo in 2024 amounted to around USD 7,947,000,000, apparently far exceeding the threshold of global sales amount NTD 40,000,000,000; Skyworks's or Qorvo's Taiwan sales amount also exceeded the threshold NTD 2,000,000,000 for sure. Here, the Taiwan FTC's merger control review will be inevitable and its approval will be required for the Skyworks-Qorvo merger.
How Will the Taiwan FTC Assess the Skyworks-Qorvo Merger?
The Taiwan FTC will assess multiple factors for the horizontal Skyworks-Qorvo merger. But the most two relevant factors are as follows.
(1) Unilateral Effect: Both Skyworks and Qorvo need epitaxial wafer as its materials before producing RF chip. In Taiwan, Visual Photonics Epitaxy Co., Ltd ("VPEC") is the biggest supplier of epitaxial wafer in Taiwan. Here, one of the issues probably will be whether the merger will bring about pressures on VPEC or other suppliers, demanding them to reduce the prices of epitaxial wafer.
(2) Countervailing Power: The Taiwan stakeholders here probably will be Win Semiconductors ("Win") and Advanced Wireless Semiconductor Company ("AWSC"). When both of Skyworks and Qorvo are acting like integrated device manufacturer ("IDM"), having their own semiconductor fabrication plants and packaging plants, it does not necessarily mean that they would not rely on OEM. In other words, before the merger, Win or AWSC can adopt a countervailing strategy, for example, refusing to support Skyworks if it cuts the OEM prices too much and then turn to Qorvo, and vice versa. When it comes to Skyworks-Qorvo merger, it represents Taiwan OEM will lose their countervailing power because the orders will all come from the same company, Skyworks-Qorvo.
Supply Chain Security
Supply chain security probably will be one of the issues to be brought to the Taiwan FTC's attention. When the U.S. is concerned that the semiconductor business shall not entirely rely on Asia supply chain, Taiwan's interests, if not Taiwan's position, will be formed in a way that the semiconductor business provided by Taiwan shall be indispensable. Therefore, the Taiwan FTC probably will examine the Skyworks-Qorvo merger from this angle.
In Skyworks's Form 10-K, it stated that "[i]t is our intent not to depend on a sole source of supply unless market or other conditions dictate otherwise"; "We also operate our own wafer processing facilities in Osaka, Japan, as well as packaging, assembly, and test facilities in Singapore and in Mexicali, Mexico." It shows that Skyworks may use the factories in other countries to diversify its risks, reducing the impacts such as natural disasters and political uncertainties. That being said, the Skyworks-Qorvo merger probably will contradict Taiwan's interests to a certain extent. Moreover, Taiwan's concerns probably will be whether the future orders will concentrate on Skyworks-Qorvo, enhancing the restrictions on competition because the merged enterprise can have better negotiating power against Taiwan suppliers.
Other Potential Issues
Skyworks's 2024 annual report showed that "[t]he Company maintains certain minimum purchase commitments under long-term capacity reservation agreements primarily with foundries for the purchase of wafers. Under these agreements, the Company has agreed to pay a combination of refundable deposits and prepayments to the suppliers in exchange for reserved manufacturing production capacity over the term of the agreements" ("Capacity Reservation Agreements"). Here, the issue is whether the merged Skyworks-Qorvo will take advantage of the Capacity Reservation Agreements, forcing the Taiwan OEM to provide massive capacity to Skyworks-Qorvo. If yes, Skyworks-Qorvo may push its competitors out of the market. In this scenario, it will definitely harm the Taiwan supply chain security.
For example, RichWave, a major RF design company in Taiwan, relying on Taiwan OEM to produce products based on its design. According to RichWave, it appears that it has already regarded Skyworks and Qorvo as one of its competitors. In terms of the Capacity Reservation Agreements, it will be very easy for the Taiwan FTC to conclude that the merger will bring about competition restriction effect on RichWave.
Moreover, following the concern with regard to the negotiating power of Skyworks-Qorvo, the Taiwan FTC probably will check, among others, whether the Taiwan OEM's gross profits will be gone if the merger is approved. All in all, this landmark Skyworks-Qorvo merger does not seem to have an easy route for the Taiwan FTC approval. Let's wait and see whether the Taiwan FTC will stick out its chest when reviewing this merger.
