Trump Blocks Broadcom's Bid For Qualcomm, Citing National Security Concerns

Mar 13, 2018
Originally published on March 14, 2018 1:20 am
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SARAH MCCAMMON, HOST:

An industry that's rarely in the spotlight is making news this week - the one that produces computer chips. Singapore-based chipmaker Broadcom had been trying to buy U.S. chipmaker Qualcomm. It would have been the largest tech deal ever. But then something pretty unusual happened. President Trump blocked the takeover, citing national security concerns. NPR's Alina Selyukh covers business and tech, and she's here with us. Hi, Alina.

ALINA SELYUKH, BYLINE: Hi.

MCCAMMON: Let's start with the basics. Broadcom was trying to buy Qualcomm for a whopping $117 billion. Why were they pushing for this massive purchase?

SELYUKH: So this is the industry that's powering the computers around the world. And both of these companies are leaders. They make chips for phones, tablets, all kinds of electronics. And Broadcom simply wanted to be bigger. Together, Broadcom and Qualcomm would have been the third largest semiconductor company in the world. So even though Qualcomm kept saying it did not want to be bought, Broadcom has been pushing for the acquisition. But an important pivot here - the size of the deal was not actually the main reason why President Trump ordered to stop the buyout.

MCCAMMON: Right. So walk us through that. Why did President Trump get involved in stopping this deal?

SELYUKH: So the history here is interesting. As you mentioned, Broadcom is based in Singapore. And only about four months ago - around the time that Republicans were writing the tax bill - President Trump welcomed the CEO of Broadcom to the Oval Office and praised his plan to relocate the company's legal address to the U.S. Here's a clip from that.

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PRESIDENT DONALD TRUMP: Broadcom Limited is a 100 - Fortune 100 company - one of the really, great, great companies.

SELYUKH: This meeting was all smiles and jokes. But then the story changed once the federal government got to reviewing Broadcom's hostile takeover bid for Qualcomm. And that's because what's at the center of this deal is really quite monumental. It's a matter of what kind of stake American tech companies can make in the future of Internet-connected devices.

MCCAMMON: Yeah, that does sound pretty monumental, Alina.

SELYUKH: Yes.

MCCAMMON: But Trump said he was blocking the deal over national security concerns. You're saying it was over the future of the Internet. So how did those two things go together?

SELYUKH: So tech and telecom companies around the world have been racing to create the new generation of Internet connections. It's called 5G, right? We have 3G, 4G. And now we're moving to 5G. And this is the super fast, super powerful wireless connectivity that will take us into this future of Internet-connected smart homes and robots and phones that can stream virtual reality videos. And, of course, we'll have driving cars that talk to each other and the street signs around them.

And in the U.S., Qualcomm is a huge driving force behind 5G development. But many countries are pushing for this - South Korea, Japan and, of course, China. And here comes Broadcom from Singapore, and it's well-known for cost-cutting. So this raised a possibility that was very concerning to U.S. officials that if Broadcom bought Qualcomm, the American company would get less research money to move ahead on 5G. And that, in turn, could give Chinese companies a big advantage.

MCCAMMON: So is it unusual that the president intervened in an international deal? Or is this the kind of thing we should expect more of?

SELYUKH: There are two ways to look at this. In general, this kind of pushback against foreign investment in the U.S. is unusual. But it's not so unusual when it comes to deals that could benefit Chinese companies - especially in sensitive fields like technology. Chinese telecom companies have faced a lot of scrutiny from American intelligence officials in recent years. And actually, President Obama had blocked another tech-related deal in 2016. So I think what we're seeing is that trend but now also combined with a protectionist administration.

MCCAMMON: OK, NPR's Alina Selyukh. Thank you, Alina.

SELYUKH: Thank you.

(SOUNDBITE OF SIRIUSMO'S "NIGHTS OFF") Transcript provided by NPR, Copyright NPR.