Trump Was Right to Block The Qualcomm Merger

The New York Times agrees with Trump’s decision to block the merger of Qualcomm and Broadcom.

Singapore-based Broadcom was trying to acquire Qualcomm, which is headquartered in San Diego.  Valuation was set at $117 billion.  Qualcomm makes chips for smartphones and other devices.  This would have been the largest technology deal in history.  Mr. Trump pre-emptively blocked the purchase on Monday.  He cited national security concerns.  The president did not provide a detailed rationale.  However, a March 5 letter from the Treasury Department called for a review of the deal.  Treasury said that the administration was concerned about Broadcom’s relationships with other foreign companies.

President Trump’s decision to block the proposed takeover of Qualcomm was extraordinary.  The deal had not even been signed.  But it was also the right move.  A series of mergers has already left the semiconductor industry dominated by just a few large companies.

The letter strongly hinted that those companies of interest are based in China. 

It also noted that Broadcom has reduced spending on research and development at the businesses it has acquired.  This practice could make Qualcomm less innovative.  That, in turn, would give Chinese businesses a leg up in the race to develop the technology for the next generation of cellphones.  The introduction of this “5G” technology is expected to provide faster internet access.  Furthermore, it is expected to generate billions of dollars in profits for the wireless industry in the coming years.

Seen against the backdrop of the president’s protectionist statements and policies, this decision is unnerving to some observers. 

However, there are good reasons to worry about the growing concentration of power, and lack of competition, in the semiconductor business.  These companies supply chips used in everything from phones and computers to cars and fighter jets.  If the Broadcom-Qualcomm merger had gone through, just three companies — Samsung, Intel and Broadcom — would have controlled more than 36 percent of the global market for chips.  And the concentration would have been far greater in certain fields, like telecommunications.

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