We have closely followed this relationCHIP saga from its conception here at NCN; anticipating whether, or not, it had the potential to be one of the biggest tech deals the industry has ever seen. In the world’s race to create the new generation of wireless that is 5G, it has come as an unfortunate revelation that US President, Donald Trump, called time on the unfolding takeover on the grounds of national security.
The takeover, blocked by Trump, also came amid concerns that it would give China the upper hand in mobile communications. According to a White House official, the presidential order reflected a calculation that the United States, leader in creating technology and setting standards for the next generation of mobile phone communications, would be lost to China if Singapore-based Broadcom took over San Diego-based Qualcomm.
In his order, Trump cited ‘credible evidence’ that the proposed $140 billion (£100 billion) deal ‘threatens to impair the national security of the US’. The potential takeover of Qualcomm by Broadcom would have created the world’s third largest maker of microchips, securing a spot behind Intel and Samsung. In the chip-making sector the race is on to develop chips for the latest 5G wireless, and Qualcomm is considered to be a leader followed closely by Broadcom and China’s telecoms giant Huawei.
Analysts say Qualcomm is highly regarded for its commitment to research and development (R&D), particularly in the field of 5G technology; the same of which is said about the equally committed Huawei. Broadcom, however, is better known for selling assets and growing through acquisitions – it is deemed weaker in the field of R&D.
With this in mind, analysts have acknowledged that a deal between Qualcomm and Broadcom could have given Huawei the chance to take over the top spot in years to come – a situation US politicians wanted to prevent given their ongoing security concerns around Chinese telecom firms doing business with US carriers.
Others have speculated that Trump’s decision was more about competitiveness than security concerns.
“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 domains,” said Mario Morales, vice president of enabling technologies and semiconductors at global research firm IDC.
“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”.
Mario adds, “Semiconductor technology and companies like Qualcomm will be an important weapon in that 5G arms race [and] the US, like other nations and regions, wants to be first.”
Could there be a pattern emerging in President Trump’s use of national security concerns as an international economic weapon?