3/14/2018 4:28:23 PM
|written By : Team India Se|
R&D. That could be the reason US President Donald Trump blocked Singapore-based chipmaker Broadcom’s hostile takeover bid for rival US chipmaker Qualcomm, according to Wired.
Broadcom is planning to abandon its bid for Qualcomm but will go ahead with its plan to move its base to the United States, reports Reuters. Moving to the US will cost Broadcom about US$500 million a year under a higher tax rate, but it could then acquire US companies without coming under scrutiny from the Committee on Foreign Investment in the United States (CFIUS), reports Reuters.
President Trump blocked Broadcom’s bid for Qualcomm citing national security concerns after CFIUS said it would stall the deal.
The US government’s real concern was probably that Qualcomm would be less innovative under Broadcom's control, reported Wired.
Broadcom is known for buying up companies and holding onto their most profitable units, selling off the riskier parts, it says. Broadcom’s spending on R&D amounted to about 19 per cent of its revenue in its most recent fiscal year. Qualcomm, by contrast, spent about 25 per cent of its revenue on R&D.
Qualcomm spends more on R&D because its most profitable assets, according to Wired, are its patents, which it licenses out to other companies, not its more expensive business of designing and selling chips.
China is also investing heavily in R&D, investing $20 billion in the semiconductor industry through its government-controlled Integrated Circuit Industry Investment Fund.
If Broadcom took over Qualcomm, Huawei and other Chinese telecommunications companies could displace Qualcomm as leaders in developing the forthcoming 5G standard for faster, higher-capacity wireless networks. That was why the takeover was opposed by the Committee on Foreign Investment in the United States. It expressed that fear in a letter to Broadcom, says Wired.
Currently, China imports about half of its semiconductors from US companies, according to the US Department of Commerce, but the US companies would suffer if China built more advanced chips.
Broadcom recently pledged to create a new US$1.5 billion fund to train the next generation of engineers and make the US the global leader in 5G, but President Trump still blocked its bid for Qualcomm.
“Broadcom's wireless chips can be found in every current iPhone model and most Android phones, and Qualcomm's Snapdragon platform powers most Android phones while its cellular modems are found in roughly half of all iPhones,” notes Wired.