Broadcom Pledges 5G Investment to Win Qualcomm Deal Approval

08 March, 2018, 02:10 | Author: Mable Gonzales
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Qualcomm's sale to Singapore-based Broadcom could hurt the chip maker's competitiveness by reducing research and development, which would threaten U.S. security, treasury said in a 5 March letter released by Qualcomm on Tuesday.

Over the weekend, the government asked Qualcomm, which is based in San Diego, to delay its annual shareholder meeting by 30 days as it conducts its review.

Qualcomm, with its Snapdragon processors, is the world's biggest maker of mobile chips and an attractive target for Broadcom.

United States regulators have cited concerns over China's influence on the 5G standard-setting process in announcing an investigation into Singapore-based Broadcom's hostile takeover of Qualcomm.

More specifically, he cited Broadcom statements indicating it may focus more on short-term profitability after any acquisition, possibly leading to a reduction in research and development spending.

Today (7 March), Broadcom issued a pledge to keep the U.S. at the forefront of emerging mobile technology like 5G if it were to acquire Qualcomm in an effort to dispel worries.

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Among the grounds for this fear are the assumption that Broadcom will have to cut back on R&D to pay down the $106 billion of debt it would have to take on to make the acquisition and some public statements from Broadcom that indicate it intends to adopt a "private equity" strategy - i.e. cost-cutting.

Broadcom, which previously blasted Qualcomm for voluntarily seeking a CFIUS review, has nominated six alternative candidates to Qualcomm's 11 member board of directors in hopes of pushing forward its $117 acquisition.

The letter raised concerns over Broadcom's plans for Qualcomm's patent licensing arm, which funds much of its research and development.

Broadcom said it is cooperating with the investigation. The US official who wrote the letter referenced worries about the potential for China to "compete robustly to fill any void left by Qualcomm as a result of this hostile takeover" and noted existing concerns around Chinese companies like Huawei. Any changes in supply of these products or services could pose national security concerns.

"Broadcom will not only maintain the R&D resources Qualcomm devotes to 5G and innovation in future wireless standards - we will also focus R&D spend to those critical technologies that are essential to the United States".

Qualcomm's shares slipped 41 cents to $64.33, while Broadcom's were down $1.46 at $249.41.

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