Embattled mobile chip-maker Qualcomm has endured one heckuva year defending itself against a wide range of damning accusations and multi-billion dollar liabilities. From the alleged abuse of its cushy, dominant position in leveraging “unfair, monopolistic control” over the mobile chip market, to the multiple government-led investigations leading to massive penalties levied against the San Diego-based Snapdragon-maker — Qualcomm is understandably weighing its options to help get back to prosperity once again.
One option recently floated as a possibility was an all-out Qualcomm acquisition by its biggest competitor and fellow chip-maker, Broadcom, which several analysts lauded for its likelihood of settling a wide range of complications for Qualcomm — while merging the two mobile-chip conglomerates into perhaps the world’s largest and most influential.
Unfortunately, that option is no longer on the table, thanks almost entirely to a Presidential Order handed-down by The White House this week.
Citing “credible evidence” that the deal could pose imminent threats to national security, the Trump administration — backed by the recommendations of the Committee on Foreign Investment in the US (CFIUS) — cited that the Singapore-based Broadcom Limited takeover of Qualcomm could give Chinese companies an unfair advantage in their deployment of next-generation 5G technologies, among other things.
Below, we present two additional reasons why the Presidential Order blocking Broadcom’s acquisition of Qualcomm is a good thing for the U.S.
√ No Foreign Interference
While Broadcom was founded and flourished for years in the heart of Irvine, California, the company was acquired by Singapore-based Avago Technologies in January, 2016 — prior to being rebranded Broadcom Limited shortly thereafter.
Being an Asian entity, therefore, while maintaining R&D centers here in the U.S., Broadcom has been trying to regain its footing in the U.S. market — and one possible way of making that a reality would have been a Qualcomm takeover.
Just considering the current economic and political climates in, and between, the U.S. and China for example, the Trump administration’s decision to quash the potential takeover doesn’t seem so unrealistic.
As CFIUS noted in its statement, via GSMArena, “Qualcomm’s leadership in wireless patents for 5G are key to national security. If Qualcomm is impeded in its R&D, Chinese companies will take the lead.”
√ Distribution of Power
As two of the largest and most influential chip-makers in the world, a Broadcom/Qualcomm takeover would ultimately create one larger corporation with too much power over the market, as well as both current and future technologies.
Most recently, we saw the U.S. Department of Justice (DoJ) impose a similar block on the highly-publicized AT&T merger with competing cable/internet heavyweight, Time Warner, for very similar reasons.
It’s nice to think that we would all benefit in some meaningful way, if two big companies like Qualcomm and Broadcom ever came together as one — but in the real world, sadly, that’s far from reality. Not only would the new, mega-entity hold too much influence over the chip market, likely raising prices and pushing out-of-business smaller, regional chip-makers vying for their own slice of the market, but anti-trust investigations and accusations similar to what Qualcomm is already experiencing would more than likely abound, too.