What Lies Ahead For Qualcomm As US Blocks Broadcom's Takeover Attempt?

What Lies Ahead For Qualcomm As US Blocks Broadcom's Takeover Attempt?

However, neither Huawei nor other Chinese tech companies have taken any active part in Broadcom's acquisition talk with Qualcomm.

President Trump's decision yesterday to effectively block Broadcom's $117 billion proposed takeover of Qualcomm on national security grounds confirmed what had become increasingly apparent in recent days - that the U.S. authorities had taken a dim view of the deal and the prospect of a foreign company buying America's undoubted leader in wireless technology.

"There is credible evidence that leads me to believe that Broadcom ... might take action that threatens to impair the national security of the United States", Trump wrote in the executive order. Since it was reprimanded in early 2015 by the local authorities over its licensing practices, Qualcomm has put in place a series of technology and licensing deals with a string of China's leading device makers.

However, it follows on from warnings last week by CFIUS that a deal, if successful, could lead to China becoming dominant in the development of 5G mobile communications technology, which "would have substantial negative security consequences for the United States".

The months-long, back-and-forth merger talk between USA chipmaker Qualcomm and its Singapore-based peer Broadcom hit an unexpected wall when President Donald Trump issued an executive order to block the deal, saying it would pose threats to national security.

Qualcomm was never really open to the idea of being acquired by Broadcom even though the latter has revised its bid multiple times and even tried to fill Qualcomm's boards with members that viewed the merger favorably.

Trumps decision comes after Broadcom said last Friday that it would ask its shareholders to approve its plan to redomicile to the US.

President Trump announced his decision shortly after meeting with both Hook Tan, CEO of Broadcom, and officials from the Committee on Foreign Investment in the United States (CFIUS). "These ties were most recently reflected in the agreements Broadcom signed with HBC, Inspur and StarTimes.�China has a finely honed capability to access the technology of companies such as Broadcom, along with that of their subsidiaries and acquisitions", he said.

Trump disagreed with this line of reasoning, however. For one thing, it is only going to become harder for foreign tech companies - not just Chinese - to acquire USA technology businesses as the White House appears receptive to any argument around the diminution of American corporate might.

"The proposed takeover of Qualcomm by the Purchaser is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected [sic] directly or indirectly, is also prohibited".

At face value, that argument doesn't hold water, given that Broadcom will very soon be a US company. The San Diego, California-based company, the world's largest maker of chips for phones (if you own a high-end Android phone, it's likely using a Qualcomm processor), owns a number of the technologies that served as the foundation for 3G and 4G technology, and it's been pouring R&D dollars into 5G. "There is certainly an argument that wireless IP/semiconductors are essential to national security".

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