Chipmaking rivals Broadcom, Qualcomm, and Intel have been involved in legal controversy, as Broadcom’s last attempt to acquire its competitor Qualcomm was slapped by a direct Trump order stating that this move “threatens to impair the national security of the United States.” It was issued by Committee on Foreign Investment in the United States (CFIUS).
However, unnerved by the chance of a Qualcomm/Broadcom merging, Intel has been considering to make a move to buy the Singapore-based Broadcom. However, based on the order issued by President Donald Trump about Broadcom’s possible acquisition of Qualcomm, it has been highly speculated that U.S regulations will prevent this.
Any successful bid by any party could prove to be highly positive for their market positioning, as all three companies are leaders in the chipmaking industry. If Broadcom is to be successful in its bid, this could boost its market value to $220 billion dollars, taking a position as the dominant company in chipmaking.
Intel’s plans are a matter of survival
It has been reported that Intel has been planning to acquire Broadcom since last year. This would make Intel the owner and somehow the leader in Bluetooth mobile chips, reassuring its position as the biggest chipmaker in the market.
In fact, this could be a more profitable move if Broadcom is successful in its purchase, although anonymous sources have confirmed that Intel plans on making the bid regardless of the result. The acquisition of Broadcom by Intel would be the biggest company move in recent times, added to the ones in the past 30 months, including Mobileye and Altera.
However, according to The Wall Street Journal, this would be an enormous bid. In fact, it would be so big that it is almost impossible for it to happen due to the current orders issued by Trump’s and CFIUS’s measures against monopolization.
Intel is considering a range of options in response to Broadcom’s pursuit of Qualcomm, including a bid for Broadcom https://t.co/PixtM7EGev
— The Wall Street Journal (@WSJ) March 9, 2018
Trump likes competition better than monopoly
President Trump personally addressed the Broadcom-Qualcomm bidding war, stating that a business move of this magnitude could harm America. Although Broadcom is currently moving its headquarters to the U.S from Singapore, it probably won’t have any influence over Trump’s decision as he has already shut down several international takeovers by American companies.
This was communicated through a letter to both Broadcom and Qualcomm’s boards, warning the companies that the government will probe deals that are considered to pose any risks to the country’s financial infrastructure.
Russian doll of chip deals
1. Intel wants Broadcom
2. Broadcom wants Qualcomm
3. Qualcomm wants NXP
— Jonathan Ferro (@FerroTV) March 9, 2018
The letter read the government’s concern over the increasing presence of Chinese technology in the U.S and the world: “A shift to Chinese dominance in 5G would have substantial negative security consequences for the United States.”
In response, Broadcom issued a letter that read: “There can be no question that an American Broadcom-Qualcomm combination will provide far more resources for investments and development to that end.”
One way or another, government regulations are sure to remain as an obstacle for these major deals.
Source: The Wall Street Journal