After spending the past few months aggressively trying to acquire Qualcomm, chip maker Broadcom is officially withdrawing its offer. That’s not exactly a big surprise: the announcement comes two days after the Trump administration issued an executive order that would have blocked the deal from going through.
Broadcom says it’s disappointed by the order, but the company still plans to move its headquarters to the United States as had been previously planned.
The Trump administration’s justification for blocking the deal was based on national security concerns. Qualcomm is a US-based company, while Broadcom is based in Singapore.
While some observers have noted that order seems to be in line with Trump’s protectionist (anti-globalist) views, others argue that there’s also a case to be made that Qualcomm’s strong position in mobile and wireless space gives the US-based company strong influence on international standards like the 5G network technology that will begin rolling out this year. If Broadcom were to acquire Qualcomm, it could lead the US having less control over those types of standards.
The issue isn’t necessarily that Broadcom is currently a Singapore-based company. It’s that a takeover could theoretically slow down Qualcomm’s investment in new technologies since Broadcom seemed to be primarily interested in acquiring the company for its licenses and intellectual property rather than for its potential to develop new technologies. So even if Broadcom moved its headquarters to the US, the result could be that the US-based chipmaker(s) would have less influence on global standards settings, giving Chinese companies a chance to dominate the future development of wireless networking technology (whatever comes after 5G, which is nearly finalized already).
It’s still an unusual move for the US government to block a private deal of this sort. And as Stratchery’s Ben Thompson points out, if Broadcom had been a US-based company that wanted to acquire Qualcomm to feast on its patents with the side effect of reducing the dominance of a US-based company in global wireless standards settings, it’s unclear if the US government would have intervened in this way. But since Broadcom isn’t currently based in the US, the Committee on Foreign Investments was able to investigate the issue and send a report to the president which resulted in this week’s executive order.
I first learned about the deal here. And then when I heard the report in the news that Trump blocked the deal, my first thought was to check Liliputing for a follow up. Thanks for posting on this!
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