Broadcom Bid for Qualcomm Carries Risks for Mobile Industry Innovation - Page 2

But there’s no reason why Samsung can’t build its own chips, especially those pesky modem chips, and there’s no reason the company can’t buy them from Intel.

If the two major phone makers decide they don’t need Qualcomm, then the company is in a world of hurt. Worse, if Apple’s lawsuits fighting the Qualcomm license fees come out in Apple’s favor, this also helps every other device maker, because they will benefit from the findings as well, cutting Qualcomm’s revenue even further.

Broadcom is in a position to make the legal troubles go away by improving the license fees so that manufacturers stop fighting them. This would have the long-term impact of ensuring a continued if somewhat lower revenue stream while Broadcom would be able to leverage its position into a near-monopoly.

But it’s not clear that such a position is good for the long term growth of the industry, or of the technologies that the industry depends on. Qualcomm, after all, is a major innovator in mobile technologies and is currently working on the hardware to support the new 5G networks that will go into operation over the next five to eight years.

Broadcom, on the other hand makes most of its money through buying companies, keeping the technologies it wants or the parts of companies it wants and selling the rest.

The company, formerly known as Avago Technologies, is the end result of the Hewlett-Packard spin-off of Agilant Technologies in 1999. Avago bought Broadcom along with several other companies and took its name.

The acquisitions, integration and sell-off of various unneeded corporate components is a core part of Broadcom’s business practices and there’s every reason to expect that to continue with a Qualcomm acquisition.

While Broadcom is known for making money through mergers and acquisitions, but it’s not as well known for its engineering acumen or as a mobile technology innovator.

While Broadcom does its own product development, it’s not on the scale that we’ve seen from Qualcomm. Problem is, Qualcomm has gotten greedy and that may ultimately bring its downfall as an independent company.

If the Qualcomm deal is possible the level of greed it displayed in the mobile chip market will moderate, but perhaps so will the level of innovation. For the long term, this is not a good thing.

Despite my overall annoyance with Qualcomm for the decision the company made years ago to kill off Eudora, which was probably the best email client ever developed, I think it’s still better for the industry for the proposed acquisition to fail, either because the numbers don’t work or because regulators oppose it, than for it to succeed and risk the extinction of its innovation-friendly culture.

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...