President Donald Trump on Monday (Mar. 12) blocked what would've been the biggest tech acquisition in history.
In a move that would have sent shockwaves through the technology industry, Broadcom floated the idea of acquiring Qualcomm in a hostile takeover worth $117 billion. The deal had been under scrutiny from regulators and others, and would have seen the Singapore-based Broadcom officially take over the U.S.-based Qualcomm.
But in an executive order on Monday, Trump said that "there is credible evidence" to suggest that a Broadcom takeover would be a problem. He specifically said that he feared that Broadcom "might take action that threatens to impair the national security of the United States" if it acquired Qualcomm. Trump's executive order went on to block the slate of Broadcom-nominated candidates who were to stand for a vote on Qualcomm's board of directors.
While Trump didn't share any of the "credible evidence" he says he saw, he gave the U.S. Attorney General full power to enforce his order and ensure Broadcom backs away.
"It is not that rare for the government to block acquisitions, said Avi Greengart, research director for connsumer platforms and devices at GlobalData. "What is unusual is blocking the sale on national security grounds for a non-defense-related company. There is certainly an argument that wireless IP/semiconductors are essential to national security."
But there may be more to the decision than just Broadcom. Bloomberg argued on Tuesday (Mar. 13), citing sources, that China-based Huawei might be to blame.
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While Huawei wasn't a part of the deal and didn't try to make a run at Qualcomm or Broadcom, there's growing concern in the U.S. that China is gaining too much control over the mobile Internet infrastructure and other components that the U.S. is increasingly relying upon. Bloomberg argues that Trump was concerned that a Broadcom takeover of Qualcomm would have allowed the Singapore-based company to weaken Qualcomm and therefore strengthen Huawei.
A panel that advises the President on business deals that could affect national security, the Committee on Foreign Investment in the U.S., also feared the somewhat strong ties between Huawei and Broadcom.
In interviews with the BBC, analysts said that Trump's decision was also protectionist. Mario Morales at IDC told the BBC that every major country around the world is in a race to deliver 5G technology. By allowing Qualcomm to slip into the hands of a foreign country, the U.S. would be left behind.
"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," Morales told the BBC.
Stuart Carlaw, chief research officer at ABI Research, sees this development as "a very positive event not only for Qualcomm but also for the market as a whole. The combined entity would have had dangerously dominant positions in some core markets such as location technologies, Wi-Fi, Bluetooth, RF hardware and automotive semiconductors.
The analyst cited the need for a diverse supplier ecosystem as it applies to IoT and mobility, as well as smart manufacturing.
While GlobalData's Greengart sees the rationale for this particular move, he's concerned about the precedent it may set.
"The risk is that this standard could be broad enough to include practically anything, and this is happening at the same time as President Trump is also trying to impose tariffs and trade restrictions," said Greengart.
