The strategic move by U.S. President Donald Trump, on national security concerns, effectively blocks China’s Huawei from being a dominant player in the emerging 5G mobile cell phone technology and allows other major players level-playing grounds in the setting up of 5G standards.
In a strategic move aimed at blocking China from gaining the upper hand in mobile communications, U.S. President Donald Trump has blocked Broadcom Ltd’s proposed acquisition of Qualcomm Inc on grounds of national security.
As per a White House official, the presidential order is reflective of a calculated strategic move aimed at improving the U.S. lead in setting technological standards for the next generation of mobile cell phone communications, which would have been lost to China, if Singapore-based Broadcom was allowed to takeover San Diego-based Qualcomm.
Qualcomm is one the biggest competitors to China’s Huawei Technologies Co.
Qualcomm had earlier rejected Broadcom’s $117 billion offer, which was being scrutinised by the U.S. Committee on Foreign Investment in the United States (CFIUS).
On March 5, CFIUS had sstated through a letter that it was investigating whether Broadcom would starve Qualcomm of research dollars and cited national security risks given Broadcom’s relationship with “third party foreign entities”.
While the letter did not spell out who those foreign entities might be, it described Qualcomm as the leading company in the emerging 5G technology development and setting up of standards.
“A shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States,” said CFIUS.“While the United States remains dominant in the standards-setting space currently, China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover.”
As per a source familiar with CFIUS’ thinking, if the deal would have gone through, within the next decade, “there would essentially be a dominant player in all of these technologies and that’s essentially Huawei, and then the American carriers would have no choice. They would just have to buy Huawei (equipment).”
Lending weight to this thinking are Huawei’s actions: the firm has been forging close commercial ties with big telecom operators across Asia and Europe which essentially places it in prime position to lead the global race for 5G networks.
However, Qualcomm is also a major player in 5G space and analysts estimate that the firm has nearly 15% of the patents that are essential to 5G.
“The proposed takeover of Qualcomm by the Purchaser (Broadcom) is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected directly or indirectly, is also prohibited,” said the presidential order citing “credible evidence”.