Broadcom CEO Hock Tan speaks while U.S. President Donald Trump listens during an event at the White House in Washington, on Nov. 2, 2017, to announce the company is moving its global headquarters to the United States. (AP Photo/Evan Vucci, File)

Broadcom CEO Hock Tan speaks while U.S. President Donald Trump listens during an event at the White House in Washington, on Nov. 2, 2017, to announce the company is moving its global headquarters to the United States. (AP Photo/Evan Vucci, File)

For the tech industry, a red flag on megadeals?

President Trump scuttled a hostile takeover by Singapore’s Broadcom of the U.S. chipmaker Qualcomm.

Associated Press

NEW YORK — The decision by President Donald Trump to scuttle a hostile takeover by Singapore’s Broadcom of the U.S. chipmaker Qualcomm could signal a shift toward stronger sector oversight.

The deal raised red flags for government officials worried about ceding control of telecom or wireless infrastructure to foreign entities in the long run.

“These transitions come along almost every decade or so, moving to a new iteration of technology,” said Jon Erensen, research director for semiconductors at research firm Gartner. “The government is being very careful to ensure the U.S. keeps its leadership role developing these standards.”

Shares of Qualcomm slid more than 4 percent Tuesday.

Trump said late Monday that a takeover of Qualcomm would imperil national security, ending Broadcom’s $117 billion buyout bid.

Although its name isn’t widely known outside the technology industry, San Diego-based Qualcomm is one of the world’s leading makers of the processors that power many smartphones and other mobile devices. Qualcomm also owns patents on key pieces of mobile technology that Apple and other manufacturers use in their products.

Qualcomm has long been a leader in previous iterations of broadband cellular network technologies like 3G and 4G and poured research and development money into developing 5G technology and related standards and practices.

More so than previous iterations of wireless technology like 3G or 4G, as 5G technology is developed, “We’re seeing China emerge and start to play a bigger role in the standards developing process,” Erensen said. At the same time, there has been a wave of consolidation in the industry, so “the direction for the technology and standards has been fewer hands at this point and the stakes are bigger.”

Industry analysts speculated that Qualcomm’s advanced work on 5G technology was the reason the government’s move to block the deal.

Also, The Committee on Foreign Investment in the United States, which reviews the national security implications of foreign investments in U.S. companies, had cited concern that Broadcom has a penchant for cutting costs, which might lead to Qualcomm being less of an industry leader.

If that should happen, a Chinese company like Huawei, which the CFIUS has previously expressed concerns about, could step in and become dominant as 5G technology and standards and practices are developed and implemented.

“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,” said Brian Fleming, an attorney at Miller & Chevalier and former counsel at the Justice Department’s national security division.

While blocking the deal doesn’t mean that China won’t become a dominant player in 5G anyway, it’s one way they can slow that down.

“They honestly believe they are helping to protect national security by doing this,” Fleming said.

Talk to us

More in Herald Business Journal

Everett Community College's Dennis Skarr sits in front of a 15-foot interactive wall that can replicate a manufacturing company's assembly line, hardware, software and networks on Wednesday, Nov. 24, 2021 in Everett, Washington. A class taught by Skarr focuses on cyber threats against manufacturers, pipelines, water treatment systems and electrical grids.(Andy Bronson / The Herald)
At EvCC, ‘The Wall’ teaches students how to thwart cyber crime

The Everett college is first in the nation to have a tool that can model cyber attacks aimed at vital infrastructure.

Double Barrel owner Lionel Madriz places a wine sale sign outside of his business on Friday, Nov. 19, 2021 in Snohomish, Wa. (Olivia Vanni / The Herald)
Job-seekers today are choosy, forcing employers to adapt

If they even show up, prospective employees are calling the shots. First question: What’s the pay?

The Lab@Everett director Diane Kamionka stands outside the Lab's new home at the Angel of the Winds Arena on Monday, Nov. 29, 2021 in Everett, Washington. When Everett Community College tore down the Broadway mall to make room for its new Cascade Resource Learning Center, The Lab@everett, a business accelerator, also succumbed to the bulldozer. However, the city of Everett found a new home for the TheLab, which serves entrepreneurs and startups: the Angel of the Winds Arena. (Andy Bronson / The Herald)
Everett business incubator finds a sporty new home

TheLab@everett, an innovation center for entrepreneurs, has relocated to Angel of the Winds Arena.

An illustration of the TerraPower Natrium nuclear-power plant planned for Kemmerer, Wyoming. (TerraPower) 20211201
TerraPower plans to build demo nuclear reactor in Wyoming

The firm, which operates a research facility in Everett, is developing an electricity-generating plant.

Local aero firms get $4.5 million from feds to protect jobs

Federal Aviation Manufacturing Jobs Protection Program grants were awarded to six Snohomish County employers.

FAA Administrator Steve Dickson speaks to lawmakers as Michael Stumo, holding a photo of his daughter Samya Rose Stumo, and his wife Nadia Milleron, sit behind him during a Senate Committee on Commerce, Science, and Transportation hearing on the implementation of aviation safety reform at the US Capitol in Washington on Wednesday, Nov. 3, 2021. Samya Stumo was among those killed in a Boeing 737 Max 8 crash in 2019. (AP Photo/Amanda Andrade-Rhoades)
Democrats push FAA for action against certain Boeing 737 Max employees

Rep. Rick Larsen co-signed the letter stating concerns over the “absence of rigorous accountability.”

FILE - In this June 12, 2017, file photo, a Boeing 787 airplane being built for Norwegian Air Shuttle is shown at Boeing Co.'s assembly facility, in Everett, Wash. Boeing is dealing with a new production problem involving its 787 jet, in which inspections have found flaws in the way that sections of the rear of the plane were joined together. Boeing said Tuesday, Sept. 8, 2020, it's not an immediate safety risk but could cause the planes to age prematurely. (AP Photo/Ted S. Warren, File)
FAA memo reveals more Boeing 787 manufacturing defects

The company said the problems do not present an immediate safety-of-flight issue.

Homes in The Point subdivision border the construction of the Go East Corp. landfill on Wednesday, Nov. 10, 2021 in Everett, Wa. (Olivia Vanni / The Herald)
Mudslide briefly stalls housing project at former Everett landfill

The slide buried two excavators in September. Work has resumed to make room for nearly 100 new houses.

Ameé Quiriconi, Snohomish author, podcaster and entrepreneur.  (Kevin Clark / The Herald)
Snohomish author’s handbook charts a course for female entrepreneurs

She’s invented sustainable concrete, run award-winning wedding venues and worked in business… Continue reading

A final environmental cleanup is set to begin next year at the ExxonMobil and ADC properties, neighboring the Port of Everett. Photo courtesy of the Washington State Department of Ecology.
Port of Everett to get $350K for its costs in soil clean-up

The end is finally in sight for a project to scrub petroleum from two waterfront parcels, owned by ExxonMobil and ADC.

Shawn Loring, owner of Lazy Boy Brewing, received $10,000 through Everett's federal CARES Act funding.  (Kevin Clark / The Herald)
Everett, Snohomish breweries to open on Everett waterfront

Lazy Boy Brewing and Sound to Summit see a bright future at the port’s Waterfront Place.

A woman walks by models of Boeing Co. aircraft, including the manufacturer's new Boeing 777X, at the Dubai Air Show in Dubai, United Arab Emirates, Wednesday, Nov. 17, 2021. (AP Photo/Jon Gambrell)
India’s Akasa Air buys engines worth $4.5 billion for new 737 Maxs

Boeing clinched a deal at the Dubai Air Show to sell 72 of the jets for some $9 billion.