Qualcomm Acquisition Rescinded

Qualcomm Acquisition Rescinded

Security President Donald Trump has blocked the approval for Broadcom a Singapore-based chip rival to acquire Qualcomm. The decision for blocking the proposal takeover is based on concerns about the rise of Chinese competitors. The $117 billion acquisition has been bared to proceed citing threats to harm the national security of the United States.

A letter from the US Treasury Department warned about the takeover that might hurt US leadership in 5G. With the fifth-generation wireless networks being deployed that could therefore poses a threat to US security.

Since 2002 every administration has figured out we are vulnerable to Chinese espionage, if they control the infrastructure. Qualcomm and Cisco are the last two companies to keep the US in the world of telecom market.

The acquisition was under investigation after the board of directors requested a review by the Committee on Foreign Investment in the United States (CFIUS)

If the takeover happened the United States will lose their influence in 5G standards, it also will open the door for Chinese firms like Huawei to dominate the market.

So far Huawei is the only company that offers a full range of 5G products. They are now positioning to be the number one 5G provider equipment.

Broadcom has pledge to invest toward becoming the leader in 5G. It is crucial for them to thrive in network to robotics, smart devices and automotive market. It is not clear at this point what intention Broadcom has by helping Huawei. It is possible they could try to dominate the market by hush-up American 5G development.

Qualcomm is a major contracting partner to the US government with high security level clearance. If a merger with a foreign company would be happening, it could raise serious vulnerabilities to the national security of the United States.

Earlier this year a proposal from Trump administration to nationalize the United State ‘5G network was considered.

Qualcomm is the first supplier in the world of microprocessors for smartphones. They have been focusing on their innovation. With an innovating culture, Qualcomm has become the leader on advancing the telecom industry.

By blocking the merger Qualcomm could continue to be the trailblazer in the telecom industry, while the board of directors went to extraordinary lengths to block the merger by going to Washington to get an injunction to block broadcom from replacing its board of directors in a standard shareholder vote. The shareholders saw a return in their equity with the merger versus America to control national security technology.

Qualcomm board of directors voted out Paul Jacobs who was a board member. Paul Jacobs is the son of the company founder, this turmoil has just began. Paul is trying to raise more than $100 billion to purchase the company back. It could be an epic achievement if he succeeds, this could remindSecurity us of Michael Dell who bought back in 2013 Dell by raising $24 billion .

This year should be interesting to see how Qualcomm is going to recover from this epic hostile takeover, what is going to happened with Paul Jacobs.

Huawei has been experiencing major setbacks in attempt to penetrate the US market.

In January, AT&T was pressured by the U.S Senate and House intelligence committees to rescind the deal to sales Huawei smartphones based on security concerns. A letter was sent to the FCC Chairman Ajit Pai stating concerns about Chinese espionage, and Huawei’s ties with the Chinese government. That could be a potential threat to the United States.

In February, the US intelligence agencies as warned Americans not to purchase smartphones made by Huawei or ZTE, stating the devices poses a security threats to American customers.

To make matters even worst for Huawei, Best Buy has stopped in March to order new phones. They are going to phase out all their line of products in their stores within the next few weeks. This could be again linked to the potential security threats.

In the last final attempt of retaliation from Qualcomm failed hostile takeover, Huawei has been trying to buy more U.S semiconductor chips. Huawei has switched their two primary sources South Korea and Taiwan to US Suppliers, in the ongoing battle to make Qualcomm’s life a little more difficult. Qualcomm has been looking at expanding their business outside of smartphones.

Has for Huawei latest move against Qualcomm it looks like they are not going to stop to interfere with them. It also is a cautionary tale for everyone doing business with corporations ties to governments while facing security concerns.

Despite the failure of the takeover Broadcom is going to remain strong with their revenue this quarter. They are still planning to redomicile in the US to avoid to face the CFIUS committee. It could give them an edge to be able to purchase US-based companies. However Qualcomm was the only chip company they could purchase, the others companies are out of their league.