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article imageOp-Ed: Trump scuttles Broadcom's attempt to takeover Qualcomm

By Ken Hanly     Mar 13, 2018 in Technology
San Diego - The decision to ban any takeover by Singapore's Broadcom of the U.S. chipmaker Qualcomm may signal a shift toward stronger control and oversight of the technology of the telecom and wireless area.
In line with Trump's America First policy, Trump no doubt wants to ensure that control of advanced technology in the area is kept out of the hands of foreign competitors such as China. Some U.S. officials had warned that the $117 billion buyout could involve ceding control of the wireless and telecom infrastructure to foreign countries such as China.
U.S. wants America to be first in technology in the area
Jon Erensen, research director for semiconductors at Gartner said: “These transitions come along almost every decade or so, moving to a new iteration of technology. The government is being very careful to ensure the U.S. keeps its leadership role developing these standards.”
Trump said in announcing the ban that allowing the takeover of Qualcomm would be a danger to U.S. national security.
Qualcomm
Qualcomm, with headquarters in San Diego California, may not be that widely known but it is an important U.S.-based multinational semiconductor and telecommunications company. It designs and markets telecommunications products and services. Much of its revenue comes from chipmaking but most of its profits come from its patent licensing businesses. The company has 224 locations worldwide.
Qualcomm makes many of the processors that power smartphones as well as other mobile devices. The company also owns patents and key pieces of technology that Apple as well as other companies use in their products.
Qualcomm has been a leader in the broadband cellular network technologies such as 3G and 4G. It has invested a great deal of time and money in the coming 5 G technology.
Worries about China gaining leadership in advanced 5G technology
Erensen said that China is playing a larger role in developing standards and there has been considerable consolidation in the industry. Development is in fewer hands while the stakes are growing. Some industry analysts suggest that the government blocked the deal because of Qualcomm's advanced work on the 5G system.
The Committee on Foreign Investment in the United States(CFIUS), a body that reviews national security implications of foreign investments in U.S. companies said that they were concerned about Broadcom's policy of cutting costs. The Committee thought that this might have the effect of Qualcomm being less of a leader in the area. This fits in with Trump's policy of ensuring that America is first.
If the merged company shows less leadership, a Chinese company such as Huawei, that CFIUS has in the past expressed concern about, could become dominant in 5G technology and standards, a situation that the U.S. wants to prevent. This provides a main reason not to allow the merger.
Stacy Rasgon, a chip analyst at Bernstein summed up the argument: "The case that has been constructed is that, given Broadcom's business practices, the worry is that they will cut investment significantly, particularly in the 5G roadmap, weaken Qualcomm, as well as the U.S. position and allow Huawei, a Chinese company to take the lead."
Brian Fleming, an attorney and former counsel at the national security division of the Justice Department said: “Over time that would mean U.S. government and U.S. technology companies could lose a trusted U.S. supplier that does not present same national security counter intelligence risk that a Chinese supplier does. They honestly believe they are helping to protect national security by doing this."
While blocking the deal may slow down Chinese efforts in the area, the Chinese may still dominate if they are willing to invest heavily in the area.
Broadcom may decide not to move to the U.S.
Given that Broadcom will not be allowed to buy Qualcomm, it might very well reconsider moving its headquarters from SIngapore where it is now to the U.S. This may mean that the U.S. is losing potential jobs as a result of its decision.
There is another recent article in the Digital Journal that reports on Trump's decision.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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