The President of the United States, Donald Trump, just became a temporary roadblock for chipmaker Broadcom and its bid to acquire the biggest smartphone chipset manufacturer in the world, Qualcomm. The reason for halting the takeover bid was due to national security grounds. From a size perspective, it would have been the biggest technology industry deal to have been struck but the United States also believes that it would have given China a massive lead in mobile communications.
Broadcom also agreed to shift its headquarters to the United States if it meant acquiring Qualcomm in an earlier capacity, but it appears that national security has come in the way of Broadcom’s goals for now. Huawei, a massive global mobile communications company that originates from China, and it is Qualcomm’s biggest competitor. So, Qualcomm is a huge asset for the United States, and the country is being extra cautious about losing grounds to China in the mobile networking.
Broadcom’s Qualcomm Acquisition Bid: The Problems
Companies like Huawei, Qualcomm, and Samsung are key players for popularising the 5G communications standards. Qualcomm is certainly seen as a prized possession for the United States government and hence, the deal needs to be kept separate until the White House can reach a conclusion on how to proceed.
A source via Reuters thinks that if the deal was allowed to take place, then the US military believes that within the next 10 years, there would have been a dominant player in the industry, possibly Huawei and American carriers would ultimately have no choice but to purchase equipment that is stamped with the Huawei brand. This can also lead to national security problems since there have been talks of cyber espionage being conducted from both countries.
“The proposed takeover of Qualcomm by the Purchaser (Broadcom) is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected directly or indirectly, is also prohibited.”
The presidential order released on Monday details the following related to the Broadcom and Qualcomm merger. Qualcomm, which had delayed its annual shareholder meeting during the CFIUS review, set the new date for March 23. Now here is where the problem lies. Since the decision comes from the president and it involves blocking the deal, it cannot be appealed. Broadcom will be shifting its headquarters to the US, and from there it will be deciding its next move.
Seeing how relentless the chip manufacturer has been, Broadcom will certainly not be giving up at this point but you also have to wonder that with the decision coming straight from Donald Trump, Qualcomm being in the hands of a foreign tech company have started to look slim.