President Trump has blocked Broadcom’s proposed $117 billion takeover of Qualcomm, citing national security concerns as the primary motive for his decision.
In a presidential order, released on Monday, Mr Trump stated that “credible evidence” had led to believe that if Broadcom were to take full control of the U.S-based Qualcomm it “might take action that threatens to impair the national security of the United States.”
President Trump’s decision may appear to be extreme, given that Broadcom headquarters in both Singapore and the United States and is actively looking to redomicile to the U.S. However, analysts believe that fears over Chinese supremacy are at the root of Trump’s verdict.
“The case that has been constructed is that [Broadcom] will cut investment significantly, particularly in the 5G roadmap,” Stacy Rasgon, a chip analyst at Bernstein, explained. If that were to happen, then Qualcomm and America’s position of strength in the 5G sector would be at risk, opening the door for Huawei to become the global leader.
This is an outcome that U.S politicians are actively planning against. Though the United States has long been seen as a leader in technology, the country’s position of strength has come under threat from Chinese competitors, many of which are supported by the state. In recent years, the Chinese government has invested heavily in the technology sector, driving spending and R&D in areas ranging from semiconductors to wireless technologies.
The fear is that is Huawei were to become a world leader in the 5G sector, it would give the Chinese firm unrivalled access to businesses and key areas of American life.
However, other analysts have taken a different view of the situation. Mario Morales, Vice President of the research firm IDC, believes that Trump’s move is all about competitiveness.
“Given the current political climate in the US and other regions around the world, everyone is taking a more conservative view on mergers and acquisitions and protecting their own,” Morales said.
“We are all at the start of a race, and you have 5G as a crown jewel that everyone wants to participate in – and every region is racing towards that. Semiconductor technology and companies like Qualcomm will be an important weapon in that 5G arms race [and] the US like other nations and regions want to be first.”
After the deal was vetoed by President Trump, Broadcom released a statement saying that the company strongly opposes the belief that its proposed acquisition of Qualcomm raises any concerns to do with national security. Shares in Broadcom fell 4.83% when the stock markets opened in Europe.
If the acquisition had gone ahead as originally planned, it would have been the largest technology deal in history. The deal would have also seen the creation of the world’s third-largest maker of microchips, behind Intel and Samsung.
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- On March 13, 2018