Another interesting angle related to the blocked Broadcom/Qualcomm merger. At
least this analysis mentions the legal trouble Qualcomm is in due to abuse of
its FRAND licensing obligations. It also suggests that the potential impact on
National Security was just an excuse, one that is increasingly used to block
foreign investment in U.S. companies.
At least there is a good possibility that Qualcomm will now be acquired by a
U.S. company, possibly Intel.
What would such a new company be named?
Intercom?
Regards
Craig
https://www.nationalreview.com/2018/03/broadcom-qualcomm-merger-national-security-threat-not/
The Tech Merger Trump Blocked Was Not a Threat to ‘National Security’
Jibran KhanMarch 15, 2018 1:50 PM
If foreign investment in the U.S. is arbitrarily blocked through executive
order, half the purpose of corporate-tax reform is defeated.
On Monday, President Trump issued an executive order to block Singapore-based
Broadcom’s takeover of Qualcomm before the two companies had even made a deal.
In the order, the president says that “there is credible evidence that leads me
to believe that Broadcom Limited . . . might take action that threatens to
impair the national security of the United States.” The move seems to have
worked, given that Broadcom withdrew and terminated its $117 billion bid on
Wednesday morning. What this evidence entails is highly unclear.
Broadcom and Qualcomm are major players in the mobile-technology space. The two
companies produce much of the silicon that powers laptops, phones, and tablets.
Despite Broadcom’s Singapore corporate headquarters, it is largely an American
company and started as a division of Hewlett-Packard in the 1960s. The company
plans to move its headquarters to the U.S. next month, quite possibly as a
result of corporate-tax reform. In fact, Broadcom’s CEO announced the move at
the White House this past autumn, standing beside President Trump as he did so.
This is the latest in a long line of trade restrictions that the administration
has taken in the name of national security. Each has been fast-tracked
unilaterally by means of Cold War–era statutes, including the recent steel and
aluminum taxes. The Trump administration has been quietly blocking
international business deals via a Treasury Department panel, the Committee on
Foreign Investment in the United States (CFIUS), that is chaired by Steven
Mnuchin. In the case of Broadcom, the president chose the much more visible
route of issuing an executive order as well. Why did this call for such
visibility? Trump will be in San Diego next week; it is entirely possible that
he wants to claim “victory” at Qualcomm’s offices.
Many have argued that the block allows Qualcomm to remain ahead of China’s
Huawei as the market leader in 5G technology; indeed, even the Wall Street
Journal endorses the Trump executive order on those grounds, despite its stance
against the steel and aluminum tariffs. The Journal editors argue that a
Broadcom merger would have meant that Qualcomm’s 5G technology effectively
ceased, because Broadcom is in the habit of deprioritizing spending on research
and development. That claim does not hold up to scrutiny. Qualcomm is currently
the market leader in 5G technology, which “is a core piece of the franchise
Broadcom is trying to purchase,” according to an analyst with Bernstein
Research before the deal was blocked, and 5G expansion was the stated reason
for Broadcom’s interest in the merger. Furthermore, Qualcomm has incurred
costly fines and lawsuits that are likely to take a toll on the company and
that Broadcom’s cash influx would help pay for.
Trump’s most prominent Senate ally on trade, Senator Chuck Schumer (D., N.Y.),
while praising the executive order on the Senate floor, laid out the other
argument, “that China has been rapacious about trade and very smart. They look
for places where they can steal our best technology.” That argument is based on
the fact that Broadcom works with Chinese companies . . . but so does Qualcomm.
In fact, so do just about all tech companies. Perhaps Schumer and Trump believe
Singapore to be part of China, but it is no more so than Geneva is part of
France. (Even if the company were not mostly American, which it is, Singapore
is a staunch ally anyway.)
There are fears that the continual denials issued by CFIUS will lead to a
chilling effect on international investment. With the expectation that approval
for mergers and acquisitions will be denied by Washington, foreign companies
may simply decide against the uncertainty of making investments in the U.S.,
and other countries could retaliate by erecting regulatory barriers against
American firms.
The Broadcom-Qualcomm merger would have been the largest in tech history. It
was likely to run into antitrust issues, especially given that the two
companies between them produce most smartphone components. The deal might have
been stopped in its tracks by antitrust regulators, but in that case at least
the reasons would have been transparent.
It is dangerous that national-security authority is invoked to justify any
measure to stop something that the president does not like. Abuse of that
authority cheapens appeals to national security and advances Congress’s
abdication of authority by encouraging unilateral decision-making from the
executive branch. It seems likely to me that the order is driven by Trump’s
“Trade wars are good, and easy to win” instincts, dressed up in the rhetoric of
national security for easy implementation and buy-in from the ideologically
unmoored. What’s more, Trump is not alone. Senators John Cornyn (R., Texas) and
Dianne Feinstein (D., Calif) want to expand CFIUS’s authority to block
investments, in the name of “modernization.”
Trump and the GOP talked up the ways in which corporate tax reform would open
up the U.S. to greater investment, and they had a point. But if the flip side
is that foreign investment is to be arbitrarily blocked, even when it amounts
to hundreds of billions, what good do the tax changes do?