China and 5G are the reasons, according to analysts, that U.S. President Donald Trump scuttled the largest ever tech deal of $117 billion.
The White House cited “credible evidence” that the deal would potentially “impair the national security of the United States” while announcing the blocking of a hostile acquisition bid of U.S chip making firm Qualcomm by its rival Broadcom.
What are the details of the worries of the U.S.?
The 5G Race
There were fears expressed by the regulators in U.S. that China would go ahead in the race for 5G networks compared to the U.S. by the takeover.
The super-fast fifth generation wireless broadband technology is being developed both by Qualcomm and Broadcom. The later is in the process of shifting its headquarters from Singapore to the U.S.
But China could get the advantage in the field because e the regulators fear that the acquisition could drastically reduce funds the 5G development project at Qualcomm following the deal, fears U.S. regulators.
Broadcom would be under constant pressure to get as much of profits out of Qualcomm as possible following a takeover because Broadcom would be financing the deal through debt of $100 billion. wrote the US Treasury Department in a letter that was made public in early March.
That would have reduced the sped of 5G research and development program dramatically at Qualcomm and its spending. The company had allocated as much as $5.5 billion for that purpose in the most recent fiscal year.
Broadcom said in a statement on Monday that it “strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns.”
Threat from China?
Chinese competitors like Huawei to gain an advantage in 5G technology is there was any drawback in the 5G research program at Qualcomm that would hurt the U.S, argued the Treasury in its letter.
“If there’s not a trusted domestic supplier of chips, everyone will have to go to a Huawei, or [another] foreign supplier,” said Brian Fleming, an attorney at Miller & Chevalier.
Huawei is viewed as a threat to the national security of the U.S. by the White House, even though the company is amongst the largest telecommunications in the world.
Huawei was effectively prevented from entering the U.S. market following a critical report about it in 2012 issued by Congress. Huawei was a serious threat to the national security of the country because of the close links of the company with the politicians in Beijing, alleged U.S. lawmakers.
The allegations have been labelled as “baseless” by the Chinese company.
Americans should not purchase smartphones manufactured by Huawei, warned the FBI earlier this year.
Can US stay ahead of China?
Because there is need of global coordination and collaboration for the development of 5G technology, therefore, it is inevitable that Huawei would get involved in the process.
Both Qualcomm and Huawei, in addition to Nokia and Intel, are already part of an international alliance for 5G and the companies have also jointly conducted test on the technology.
There are some who disagree about the alleged threat to U.S. national security from the deal.
“5G is a core piece of the franchise Broadcom is trying to purchase,” Bernstein analyst Stacy Rasgon wrote in a note to clients before the deal was blocked.
“The cases [against the deal] as laid out feel very weak to us, but politics is politics,” Rasgon wrote earlier in March.
(Adapted from Money.cnn.com)