Trump Forbid Broadcom To Buy Qualcomm

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Last November, Qualcomm was blatantly refusing Broadcom’s buying offer. The proposal “dramatically undervalued Qualcomm and came with significant regulatory uncertainty” which was a way of saying they thought they were worth more and were waiting for a counteroffer. Analysts expected the company to further negotiate the terms, instead of backing off… and it did. Now, though, the whole affair has come to an abrupt end as the U.S. President prohibited the sale altogether.

Before you go and blame Trump for wanting to control anything and everything, let’s get an understanding of why Broadcom wants Qualcomm so badly. The way things were going in 2017, Broadcom was likely to accept Qualcomm’s huge demand – $160 billion for the sale! If the deal went on, it would have been the largest transaction of this type in the tech world.

The U.S. Treasury Committee on Foreign Investment (CFIUS) intervened before it could come to fruition with a letter concerning Broadcom’s previous behavior when it came to research spending as well as their business relationships with foreign countries… ahem… China. Now, it’s no secret that Trump is trying to keep American businesses in America – carriers decision to not sell certain smartphones comes to mind in this context. 

It might be more than that, though. Trump is willing to intervene in private affairs, in fact in a deal regarding a company which is out of U.S. jurisdiction, because of Broadcom’s potential plans with Qualcomm after the sale. The most lucrative division of Qualcomm isn’t chipmaking, as you might believe, but patent licensing.

With Samsung taking over processor-making, Qualcomm could close “shop” tomorrow and it would still make billions. This is because their patent licensing division enables them to make profit from every tech company using one of their patents. With 5G around the corner, those patents will only become more valuable.

Is it wrong to assume that Broadcom wants Qualcomm just for that and would dismantle the other division if it suits their interests? Not really. Research and development could come to a halt and, given their allegiance to China, the transfer of power in the tech world would happen swiftly.  Suddenly, China would have control over hundreds of billions of devices and hundreds of companies.

Is that really advisable? Remember, you cannot shake hands with a clenched fist.

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