Broadcom has official lodged a $103 billion bid for rival company Qualcomm. The bid could lead to a mega chipmaker worth a staggering $200 billion. And while Qualcomm will be tempted to take the deal, given its recent struggles with antitrust regulators and its ongoing patent war with Apple, it may not be up to them.
Regulatory controls set up to prevent monopolies in the market as well as rival companies – particularly in China – are likely to do all they can to prevent the deal from going ahead. Chinese ambitions to buy U.S. chipmakers have been thwarted by US regulators and that is likely to have an impact on this proposed deal. No doubt the topic will be raised this week when President Trump visits China, with Qualcomm in tow.
And industry analysts are convinced that China’s anti-monopoly regulators will be keeping a keen eye on the deal. “This is a critical industry for China and Qualcomm has been fined by the Ministry of Commerce (Mofcom) before so it’s on its radar,” said Wendy Yan, Shanghai-based partner at law firm Faegre Baker Daniels.
Likewise, Hewbert Hovenkamp, a lecturer at the University of Pennsylvania, believes that certain regulations would have to be put in place before any deal could be agreed. For example, he believes that US regulators would have to ensure that the deal did not lead to higher chip prices. ”Based on what I’ve seen, it seems unlikely to me that there’s a basis for a challenge (to stop the deal),” he said.
Broadcom is well established within the mobile chips and telecoms industry. However it doesn’t pack much of a market punch when it comes to LTE and 5G chips. That is where the Qualcomm acquisition would provide particularly fruitful for Broadcom, who could utilise Qualcomm resources to acquire a greater presence in the smartphone and IoT spheres.
Both companies have already seen their shares rise dramatically since rumours of the deal surfaced over the weekend. Shares in Qualcomm have risen by some 13 per cent, since the Financial Times first reported Braodcom’s interest. Likewise share prices in Broadcom have shot up by some 6 per cent since the reports of a takeover began to surface.