The presidential order issued by the White House official website shows that, according to the recommendations of the Committee on Foreign Investment in the United States, Trump said: “There is reliable evidence that leads me to believe that Broadcom’s acquisition of Qualcomm may take actions that may undermine US national security.”
For Trump's order, Broadcom said that he is reviewing the presidential decree but strongly opposed any national security concerns raised by the acquisition of Qualcomm. Qualcomm said today that it has received the President of the United States and will advance the general meeting of shareholders to March 23 as required.
If there are no surprises, this staged drama of acquisitions should end soon.
Transaction threatens national security
At the beginning of this month, the United States Foreign Investment Commission (CFIUS) ordered Qualcomm to postpone the annual shareholder meeting. CFIUS believes that this potential transaction may threaten US national security and will conduct a full investigation of Broadcom’s acquisition proposal. Previously, the US regulatory authorities had never preceded the review of uncompleted transactions.
On March 7, CFIUS sent a letter to Broadcom, saying that its acquisition of Qualcomm will pose a threat to the United States. “Given the concerns of the US National Security Department over Huawei and other Chinese telecommunications companies, China’s dominant position in 5G will have a negative impact on the United States on serious national security,” said the letter.
CFIUS believes that if Broadcom succeeds in acquiring Qualcomm, according to Bo’s decision to reduce R&D expenditures, the new company will focus on short-term profits and ignore R&D.
According to the Financial Times report, in early March, the National Security Council of the United States issued an open letter opposing Broadcom’s acquisition of Qualcomm, saying that the transaction may lead China to surpass the United States in key 5G technologies. 5G technology is used to develop smart cities and autonomous driving. The goals based on the Internet of Things are crucial.
In other words, behind the threat of national security, the United States is actually worried that the development of Qualcomm's 5G technology will lag behind.
Wang Yanhui, an expert in the semiconductor industry, pointed out to Time Finance: “At present, Qualcomm’s only rival is Huawei in terms of 5G technology and standards.”
In order to dispel the concerns of the US regulatory authorities, Broadcom responded earlier this month that if the acquisition of Qualcomm's transaction is completed successfully, Broadcom will establish a US$1.5 billion new fund in the United States to train and educate the next generation of American engineers. This will ensure " The United States' Global Leadership in the 5G Market."
In addition, Broadcom, which is headquartered in Singapore, has already anticipated that it will encounter obstacles from CFIUS and plans to move the company to the United States in mid-May this year to circumvent this as a foreign company. However, it seems that Broadcom’s “sincerity” is not sufficient to avert the fears of the U.S. government.
"There is no winner in this farce"
The "Double-Tap Mergers and Acquisitions" involves multiple interests. Today, Trump has cut off orders and some people are happy.
According to Wang Yanhui, an expert in the semiconductor industry, “This farce has no winner” and Qualcomm has paid a heavy price to resist Broadcom’s acquisition: the purchase of NXP Semiconductors increased its price, the chairman was removed from office, and the shareholders were offended; A lot of promise has been raised.
However, for Chinese mobile phone manufacturers such as OPPO, vivo, Xiaomi, and ZTE, the double-pass merger is also a good news. The industry generally believes that Broadcom’s acquisition of Qualcomm further exacerbates the industry’s monopoly, adversely affecting downstream handset manufacturers, and undermining the existing mature cooperation model with Qualcomm.
Qualcomm’s competitor MediaTek will face greater pressure. After all, the competition in Qualcomm and MediaTek has become increasingly fierce in the mid-end handset chip market.
Whether it is the authorities or bystanders, in the acquisition storm of Broadcom and Qualcomm, they ate a bit of dismay. Finally, Trump’s ban on papers broke everyone's minds and it was embarrassing. In the upcoming 5G era, how will Qualcomm go next and who can become the industry leader is still worthy of attention.