by Dylan Scott, NEE
Trump Administration Preemptively Blocks $177 Billion Qualcomm-Broadcom Deal
The Trump administration has blocked the biggest tech deal in history earlier this week. The proposed deal would see Broadcom acquiring Qualcomm for a whopping $117 billion.
In the unprecedented move by the White House, they expressed concerns about giving China a technological advantage over the United States through this deal and said that blocking the deal was “necessary to protect the national security of the United States.”
For some background, Qualcomm is an industry leader for manufacturing wireless chips for LTE networks. They are an American company that will be at the forefront of producing 5G technology, or the next-gen wireless infrastructure.
Broadcom is made up of two companies, which includes their namesake as well as Singapore-based Avago, which acquired the original Broadcom and took its name in the deal. They also make chips used in wireless networks and they’re looking to relocate to the US.
A major issue with this deal is that it gives foreign ownership of one of the biggest American companies in the tech industry that could severely impact innovation and advancement within the United States.
An adjunct issue, and really the core of the problem, is that Broadcom secured almost $100 billion in debt financing for the proposed deal, and thus would be very overleveraged. This would give them less opportunity to focus on creating 5G technology and make way for the Chinese company, Huawei, to take the global lead on 5G innovation.
5G isn’t the only issue, however, according to Ron Napier of Napier Investment. From his interview with CNBC:
“It is not just China, it is not just chips. It is broad technology. It is US military power and economic power going forward and he’s got a very consistent point of view…Trump has been saying all year long since he was inaugurated that security is very important to him, technology is very important to him, trade is very important to him and getting jobs back to the United States is very important to him. He’s making this all into one fabric[.] He sees this as the U.S.’ last big stand if it’s going to remain the leader of the free world[.]”
To be fair, he has a point. China has been engaging in predatory trade practices to bolster their advanced industries for decades, and steals $360 billion of intellectual property annually. This is why the Trump administration has recently pressured China to reduce their trade deficit and cut back on the thievery of American IP.