US President Donald Trump officially killed the acquisition of US chip-giant Qualcomm on Monday night. An executive order, signed by the president, stated there is ‘credible evidence’ that the proposed $140 billion (£100bn) deal ‘threatens to impair the national security of the US.’
Had it been allowed to move forward, the acquisition would have been the largest technology sector acquisition to date, making the new company the world’s third-largest chip manufacturer, behind Intel and Samsung.
Opens the Door for Chinese Influence
The president’s executive order comes a week after the Department of the Treasury’s Committee on Foreign Investment in the United States came to a similar conclusion.
Aimen N. Mir, Deputy Assistant Secretary for Investment Security, explained that the acquisition would have given China a leading role in creating the global standards for the new fifth-generation (5G) mobile technology:
“…a weakening of Qualcomm’s position would leave an opening for China to expand its influence on the 5G standard-setting process. Chinese companies, including Huawei, have increased their engagement in 5G standardization working groups as part of their efforts to build out a 5G technology.
“For example, Huawei has increased its expenditures and owns about 10% of 5G essential patents. While the United States remains dominant in the standards-setting space currently, China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover.”
The letter went on to explain that following an acquisition, Broadcom would likely reduce Qualcomm’s R&D spend, to increase short-term profitability. This would allow Chinese companies to forge ahead in creating the new standards for 5G.
As 5G technology is seen as a crucial driver of the Internet of Things (IoT) and gigabit-speed mobile access, it’s one of the most anticipated and valuable emerging technologies in the world.
In a statement issued following the executive order, Broadcom wrote:
“Broadcom is reviewing the order. Broadcom strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns.”
In November 2017 Broadcom CEO Hock Tan, announced at the White House that Broadcom would be re-domiciled in the US. The company is currently based in Singapore, but has a ‘co-headquarters’ in California.
Mr Tan, said at the time, “I am American, as are nearly all my direct managers, my board members, and over 90% of my shareholders,” Tan said. “So today, we are announcing that we are making America home again…”
“Our commitment to re-domicile into the United States is a huge reaffirmation to our shareholders, to the 7,500 employees we have across 24 states in America today, that America is once again the best place to lead a business with a global footprint.”
According to Ars Technica, there may be additional introgue on the horizon. The site report that the Wall St Journal is suggesting Intel may interested in buying Broadcom.