Broadcom has made an unsolicited bid of $130billion for Qualcomm and, if successful, the deal would create a company worth more than $200bn.
According to the latest figures, the merged company would be the third largest electronics business after Intel and Samsung. Although Samsung may be an immediate target, if Qualcomm gets its ARM server chip act together, then Intel could also be in the crosshairs.
While there may be compelling financial benefits for the deal – and it could help to deliver more advanced semiconductor solutions, if Broadcom’s CEO Hock Tan is to be believed – many think it could face stern scrutiny from regulatory authorities, particularly China.
According to sources in Beijing, there are real concerns at the huge size of the proposed deal, especially when the Chinese government is making a concerted and strategic push into setting up its own semiconductor industry.
Chinese regulatory approval could also be affected by on-going sparring between Beijing and Washington over a number of technology deals. The Committee on Foreign Investment in the United States has already blocked a number of takeovers involving Chinese firms this year, including the proposed acquisition of Lattice.
Qualcomm has also come under fire over competition concerns and has agreed to pay fines amounting to almost $1bn following a Chinese investigation into anti-competitive practices.
Qualcomm is, according to lawyers in China, ‘on its radar’. China is making a major push to develop its own semiconductor industry under local champions, so it’s likely this deal will also have a keen political edge. Chinese chipmakers can be expected to raise concerns about the deal.
There’s no doubting this deal is likely to be very complex. While the chances of the Chinese government blocking the deal are slim, the firms may well have to sell certain business units for it to go ahead. And the EU may well flex its regulatory muscles, so it’s going to be an interesting year ahead for both companies.