Trump Presidential Order Keeps Qualcomm on Independent 5G Path—for Now

NEWS ANALYSIS: President Donald Trump’s administration gets bipartisan praise for ending the attempted foreign takeover of U.S mobile chip maker Qualcomm, which is an important source of critical technology for government agencies.

Trump Blocks Broadcom Buyout

Since mid-November 2017, Singapore-based Broadcom has been trying to convince Qualcomm’s leadership and shareholders to accept its $117 billion bid to acquire the U.S. producer of mobile device chips and wireless networking technology.

Broadcom’s goal was to reach a date certain for Qualcomm shareholders to vote on its slate of corporate directors who would act favorably on its buyout bid, which would be one of the most expensive acquisition deals in technology industry. But Qualcomm’s resistance as well as U.S. government objections repeatedly delayed the shareholder vote.

Now, the intervention of President Donald Trump has eliminated any chance that shareholders will get to vote on the offer by signing a Presidential Order that asserted there is credible evidence that Broadcom’s takeover of Qualcomm “might take action that threatens to impair the national security of the United States.”

The order also declared that 15 people that Broadcom nominated to take over Qualcomm’s board are disqualified from standing for election to those positions. The order also directed Qualcomm to conduct its previously postposed shareholder meeting within 10 days of the order minus the vote on Broadcom’s slate of board of directors nominees.

Senate Minority Leader Chuck Schumer (D-NY) took the unusual step of praising the White House action in a speech on the Senate floor. In his speech, Schumer raised the specter of Chinese ascendency in technology and suggested that China might be behind the Broadcom effort and decried what he described as Chinese efforts to take over U.S. technology companies.

While there’s no direct evidence that Broadcom made its buyout offer at the behest of the Chinese government or Chinese technology companies, Broadcom does not have a track record of investing in its own R&D programs. There have been rumors that the company intended to essentially shutdown Qualcomm after acquiring its technology and its patents.

Considering that Qualcomm’s patents are in the majority of mobile phones sold globally and its chips are in about half of mobile devices sold in the U.S., there’s a lot of value there. But that wasn’t what had the White House worried enough to block Broadcom. The real reason is 5G.

Qualcomm is a global leader in 5G communications and it’s been behind most of the 5G carrier demonstrations happening in the U.S. and internationally. The company’s leadership is important because 5G is a global standard, unlike some communications standards such as the CDMA standard used by Verizon and Sprint, which are mostly unique to the U.S.

Equally important, this administration is so convinced that 5G is a critical technology that the administration has proposed a national 5G network as a way to retain control of it. While that effort appears to be on hold, it’s clear that U.S. carriers as well as carriers based in other friendly nations are ramping up as fast as they can to keep their hands on the technology. But then, so is China.

With the presidential order, the takeover battle would seem to be over. But it might not be over forever. Broadcom is already talking about moving its headquarters back to the U.S., which may be enough to satisfy the Committee on Foreign Investment in the US (CFIUS).

But considering the way the order is worded, it still may not pass muster with the White House because of a paragraph in the order that says, “Any transaction or other device entered into or employed for the purpose of, or with the effect of, avoiding or circumventing this order is prohibited.”

Qualcomm has seen its income decline over the past few years because of its battle with Apple over patent infringement, according to statements by the company. However, Apple has begun bringing in Intel communications chips that apparently don’t infringe on Qualcomm’s technology while it has continued to buy chips from Qualcomm for some purposes. These moves would seem to lighten the burden of patent fight and perhaps help Qualcomm return to more robust financial results.

So what’s next? Qualcomm is doing what it can to cement its 5G leadership position and with the Broadcom issue resolved, it can spend more of its time and money focusing on 5G. Because 5G is a global standard, this gives Qualcomm the edge in providing the communications chips that the industry needs globally. Even if other companies also develop this technology, Qualcomm’s leadership means its silicon will be designed into the 5G products everyone uses.

Closer to home, the presidential order likely means that 5G will come along sooner than it might have if Broadcom were to acquire Qualcomm. Getting that standard moved from testbed to real products requires real innovation and research. Qualcomm is in the best position to push the development of 5G to the finish line of any major chip maker.

However, this doesn’t mean that Qualcomm is out of the woods. Its weak financial performance over the past few years means it could still be a buyout target by another company. Whether that would be good for 5G development would depend on the investor.

But what’s important to a world that’s waiting for 5G is that a potential buyer a company committed to research and innovation. For the time being at least, Qualcomm retains the opportunity to define its own destiny and generate new business growth and value from 5G technology. 

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...