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You are here: Home / Chips & Processors / Broadcom Tries To Ease U.S. Fears
Broadcom to US: No Worries, We'll Make American Tech Great Again
Broadcom to US: No Worries, We'll Make American Tech Great Again
By Mike Freeman Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
Broadcom promised Wednesday to make the U.S. a global leader in new 5G networks in hopes of easing government fears that its hostile takeover of Qualcomm would derail America's mobile technology leadership.

The pledge came after the multi-agency Committee for Foreign Investment in the U.S. (CFIUS) said on Monday that it's concerned Broadcom would slash research and development spending on vital wireless technologies should it acquire Qualcomm -- handing mobile leadership to China.

"Broadcom will not only maintain the R & D resources Qualcomm devotes to 5G and innovation in future wireless standards -- we also will focus R & D spend to those critical technologies that are essential to the U.S.," the company said in a statement.

The company also said it would create a $1.5 billion fund to train and educate engineers in the U.S. "This will ensure America's lead in future wireless technology," the company said.

Qualcomm declined to comment.

Since 5G networks are expected to begin rolling out in 2019, Broadcom's pledge to maintain R & D spending comes after most of the difficult, fundamental research is finished, said Jim McGregor, principal analyst with technology consulting firm Tirias Research.

"5G is coming out next year. It is already done," he said. "So what did Broadcom just commit to? They committed to investing in 5G for 12 months."

Qualcomm has been investing in 5G for a decade.

"It is not the 5G investment that the U.S. government should be concerned about," said McGregor. "It is 6G, 7G or whatever comes next."

Qualcomm spends about 25 percent of its revenue on R & D -- averaging $5.4 billion a year over the past three years.

Broadcom spends less -- about $3.3 billion last year -- or 19 percent of revenue.

Broadcom invests differently than Qualcomm, said McGregor. While Qualcomm makes long-term bets to invent new technologies such as 5G, Broadcom targets technologies that are further along with market adoption in sight, he said.

"They don't invest in risk," said McGregor. "They don't really invest in new technologies or risky technologies unless they seem them coming to fruition. Then they buy them."

Broadcom's move shows that -- despite the CFIUS probe -- it's not backing away from its effort to acquire San Diego's Qualcomm for $117 billion in what would be the largest semiconductor deal ever.

But it also raises questions about the steep hurdles that CFIUS and other global regulators might place in front of the potential transaction.

CFIUS has the power to block acquisitions on national security grounds. Late Sunday the agency ordered a 30-day delay of Qualcomm's annual shareholder meeting to conduct an investigation.

CFIUS's intervention at this early stage is rare. It doesn't usually begin a probe until a deal has been struck.

But Broadcom's hostile takeover attempt to gain control of Qualcomm's board of directors led to the agency's early involvement. Shareholders are voting on whether to replace six Qualcomm board members with Broadcom nominated candidates -- which would give Broadcom a board majority.

Broadcom is based in Singapore, which gives CFIUS jurisdiction to investigate. But the company is in the process of moving its headquarters to the U.S., which it expects to complete in May.

"We believe it will be a stretch for CFIUS to claim Broadcom remains foreign-controlled after (the headquarters move) is completed, though CFIUS may of course try," said Bernstein Research Analyst Stacy Rasgon.

Among CFIUS's key concerns is Broadcom's "private equity style" business approach of cutting long-term R & D to boost short-term profits.

CFIUS worries Broadcom could thwart U.S. technology leadership -- headed by San Diego-based Qualcomm -- in 5G networks.

5G will bring ultra-fast, reliable wireless connectivity to cars, health care devices, infrastructure and a host of other machines beyond smartphones.

A weakened Qualcomm could hand over 5G telecommunications prowess to Huawei Technologies and perhaps other Chinese companies, which have been investing heavily to gain a beach head in 5G technology ahead of the transition from 4G networks.

Qualcomm's shares ended trading Wednesday up 35 cents at $62.49. Broadcom's dipped $3.91 at $247.05. Both trade on the Nasdaq.

© 2018 San Diego Union-Tribune under contract with NewsEdge/Acquire Media. All rights reserved.

Image credit: Qualcomm; Broadcom; iStock/Artist's concept.

Tell Us What You Think


Posted: 2018-03-09 @ 9:38am PT
@Jonas: Sounds like you're a Trump fan. Nah, probably not so much, I'm just messing with you. From my point of view, I would be happy if we can all come together and make America great again. And yes, let's make American tech great again, too. Why shouldn't we all strive to be the best we can be? Let's get past the negativity and do great things together.

Jonas Steinberg:
Posted: 2018-03-09 @ 7:20am PT
Quite literally either the worst headline for an article or the worst slogan for a tech company to adopt: "make American tech great again". My first thought is same as I have when I hear Trump supporters say that: "Make America Go Back 100 years again."

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