Singapore-based semiconductor manufacturer Broadcom Corporation suffered a major setback in its plans to acquire U.S.-based Qualcomm. The U.S. government announced that the merger and acquisition affects national security, prompting an investigation led by the U.S. Foreign Investment Commission.
In addition to international security, the U.S. government is worried that if Qualcomm were acquired by a foreign company, then U.S. will lose its lead position in the 5G sector and rely on East Asia and companies such as Huawei to become the leader.
The U.S. Foreign Investment Commission has previously asked Qualcomm to postpone its shareholder meeting in order to investigate whether the deal will threaten U.S. national security. The U.S. Treasury has expressed concerns in a letter to the U.S. government on Monday.
Broadcom Corporation is part of Avago Technologies, headquartered in Singapore. The company was born out of Hewlett-Packard’s semiconductor business, and then grew following countless mergers and acquisitions. Avago renamed itself as Broadcom after it purchased the American chip manufacturer. With the brand name Broadcom, many people mistakenly believe that the Singaporean enterprise is an American company.
According to the San Diego Tribune, the U.S. Treasury believes that the acquisition would damage the U.S. position in the 5G sector.
The Treasury believes that if Qualcomm were taken over by foreign companies, then Chinese companies such as Huawei may gain 5G leadership.
“While the United States remains dominant in the standards setting space currently, China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover,”
the Treasury Department wrote in a letter sent to Qualcomm and Broadcom.
The world is in the midst of a race for a 5G network. Multiple mobile operators in China and the United States announced that they will build experimental 5G networks in cities this year. The 5G network not only affects telecom equipment makers and handset manufacturers, but also will bring about social changes. 5G will become a communication platform for all networking equipment and influence all aspects of daily life.
Qualcomm is the world’s largest mobile patent R&D agency. Qualcomm makes huge profits from its numerous patents every year, but Qualcomm’s technology has also contributed to the progress of human communications. Qualcomm processors have been recognized by phone manufacturers and consumers.
In the telecommunications field, Huawei is one of the world’s three major telecommunications equipment manufacturers (the other two are Nokia and Ericsson), with large market share and high competition.
Huawei has provided telecommunications equipment for many countries around the world to build local 4G mobile communications networks. In the 5G technological revolution, Huawei will naturally take the lead.
Huawei’s strength has also sparked unease in the U.S. Huawei planned to sell high-end phones in the U.S. in the past few months, but AT&T backed out of a partnership with Huawei under pressure from U.S. government.
Recently, the United States has also pressured the Australian government and Australian telecom companies not to buy Huawei’s equipment for 5G networks, which the U.S. believes will affect the intelligence-sharing cooperation.
To facilitate acquisitions, Broadcom announced that it could relocate its headquarters to California by this May, as some of its business is already located in the United States.