Broadcom pledges $1.5 billion USA investment in Qualcomm deal

Cheryl Sanders
March 10, 2018

The statement also promised to create a $1.5 billion fund with a focus on innovation to train and educate the next generation of U.S. engineers to ensure the country's lead in future wireless technology.

In his letter to Congress, Tan said Broadcom is "fully committed to making the United States the global leader in 5G by focusing resources and strengthening leadership in this area".

Since 5G networks are expected to begin rolling out in 2019, Broadcom's pledge to maintain R & D spending comes after most of the hard, fundamental research is finished, said Jim McGregor, principal analyst with technology consulting firm Tirias Research. Broadcom is based in Singapore and is in the process of moving their headquarters to the United States and becoming a US company.

Broadcom in November 2017 announced an unsolicited $105 billion bid for Qualcomm, the world's top maker of processors for mobile devices like smartphones and tablets. "Any notion that a combined Broadcom-Qualcomm would slash funding or cede leadership in 5G is completely unfounded".

But why the $1.5 billion pledge for American workers? The review of Broadcom's bid illustrates the US government's expanding focus on the competitiveness of the national semiconductor industry as China advances.

CFIUS plans to further assess the proposed acquisition to evaluate the potential security threat.

"Hostile takeovers typically destroy the viability of the acquired asset because they are massively disruptive and the acquired employees aren't slaves and will oppose the new management", he said. Late Sunday the agency ordered a 30-day delay of Qualcomm's annual shareholder meeting to conduct an investigation.

"Broadcom will not sell any critical national security assets to any foreign companies", the letter said.

The company said Wednesday that it expects the move to be completed by May. Shareholders are voting on whether to replace six Qualcomm board members with Broadcom nominated candidates - which would give Broadcom a board majority.

CFIUS's intervention at this early stage is rare. FT continues: "Cfius took issue with Broadcom's "private equity-style" plans, which it wrote could lead to a reduction in Qualcomm's large research and development budget in favour of "short-term profitability".

United States semiconductor giant Broadcom, who has been after buying smartphone chip from Qualcomm for quite some time, is likely to have to wait even longer thanks to management opposition and USA national-security concerns.

The chip giant's last rejected proposal was for $82 per share, which breaks down to $60 in cash and $22 in Broadcom stock.

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