US v Asian tech: Trump blocks Broadcom’s takeover of Qualcomm

13 Mar 2018

US president Donald Trump. Image: Evan El-Amin/Shutterstock

Trump’s block of Broadcom takeover of Qualcomm is really about tech dominance in the 21st century as the power of mobile tech and 5G edges closer to Shenzhen than Silicon Valley.

Citing national security concerns, US president Donald Trump has killed Singapore-based Broadcom’s takeover of chip giant Qualcomm.

Trump said he blocked the acquisition of Qualcomm by Broadcom because he has “credible evidence” that the Singapore company and its affiliates “might take action that threatens to impair the national security of the United States”.

In a presidential order, Trump said he was taking the action in his authority as president of the US and Section 721 of the Defense Production Act of 1950.

“The proposed takeover of Qualcomm by the purchaser is prohibited, and any substantially equivalent merger, acquisition or takeover, whether effected directly or indirectly, is also prohibited,” he said.

In a statement, Broadcom said it is reviewing the order and “strongly disagrees that its proposed acquisition of Qualcomm raises any security concerns”.

Tech is at the heart of a new trade war

Trump’s efforts to block Broadcom’s $117bn bid for Qualcomm are highly unusual.

In recent weeks, Broadcom has made efforts to dispel fears in the US, even offering to move its headquarters from Singapore to the US.

A key factor could have been that the merger would have put one of the US’s largest chip manufacturers in the hands of a company that is based in Asia.

Asian companies in recent years have been in a technological race against US companies to lead the next generation of mobile technology.

At the recent Mobile World Congress in Barcelona, Asian companies from Broadcom to ZTE, Huawei and Samsung were certainly there in greater force than US stalwart brands.

Indeed, one of the US’s most renowned radio communications companies, Motorola, is now owned by a Chinese tech company, Lenovo.

The real battle in mobile tech is edging closer and closer to the next generation of mobile, 5G, and powerful antenna systems and chipsets that enable edge computing or powerful data centre-like capabilities direct to devices on the edge, such as driverless cars, wearables and handsets.

As such, in the race for tech leadership and especially chip technologies, the US is becoming acutely aware that the centre of gravity in tech is slipping closer to Shenzhen and away from Silicon Valley.

Trump did not specify what national security concerns he was concerned about.

However, a letter sent last week by the Committee on Foreign Investment in the US (CFIUS) to both Qualcomm and Broadcom said it was concerned that R&D at Qualcomm might wither under Broadcom.

If that happens, the dangers are that R&D outputs by players such as Huawei – which spends $10bn a year on R&D alone – might become much more dominant around the world in everything from smartphones to antennas that enable edge computing.

The protectionist stance by Trump is a whole new departure for the tech industry and comes in the wake of the Trump administration announcing a series of harsh tariffs on steel and aluminium imports.

Last September, Trump also blocked the $1.3bn acquisition of Portland’s Lattice Semiconductor by a private equity firm with ties to Beijing.

It was one of a number of such deals blocked by Trump at the behest of CFIUS.

“I hereby reserve my authority to issue further orders with respect to the purchaser and Qualcomm as shall in my judgement be necessary to protect the national security of the United States,” Trump said in his statement.

US president Donald Trump. Image: Evan El-Amin/Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years