Broadcom+Qualcomm
It is said that Singapore-based Broadcom, the world's fourth-largest semiconductor company and Wi-Fi chip maker, is considering acquiring Qualcomm, the world's third-largest chipmaker and mobile chip maker. It is expected that if the deal is done, the deal will have an impact on Korean semiconductor and mobile phone companies such as Samsung Electronics, SK Hynix Semiconductor and LG Electronics.
Bloomberg and other foreign news outlets reported on November 5 that Broadcom is planning to take over Qualcomm for US$100 billion. If and when this deal is completed, it will do down in history as the largest-ever M&A deal in the semiconductor market.
In the first place, there were many negative views in the US about an Asian company (Broadcom)’s attempt to take over Qualcomm which has core technology of the United States but such views vanished as Broadcom announced that they will move their headquarters to the US on November 4 (local time).
It is even said that US President Donald Trump invited Broadcom's top executives to the White House for the M&A and the US Fair Trade Commission (FTC) decided not to raise a market monopoly issue on the merger. Broadcom and Qualcomm have not commented on the report.
Broadcom acquired by Avago Technologies of Singapore last year for US$ 37 billion ranks fourth among global semiconductor companies after Intel, Samsung Electronics and Qualcomm in 2016 sales. Broadcom recorded a 50% share in the special purpose (Wi-Fi) semiconductor market.
Qualcomm has grown by supplying mobile communication application chips for Samsung Electronics and LG Electronics smartphones and Apple's iPhone. However, Qualcomm fell into a crisis as Qualcomm fought a legal battle with Apple, its largest customer over a patent and is forced to pay a huge amount of penalties and compensations for damages (estimated at 5 trillion won by the industry) on charges of unfair business practices in China, Korea and Taiwan. The Wall Street Journal reported late last month that Apple will use chips from other companies such as Intel instead of Qualcomm chips beginning next year. "If Broadcom acquires Qualcomm, Broadcom may lay the foundation for resolving the dispute with Apple," Bloomberg said.
Broadcom's revenue last year was US$ 15 billion. Thus, even if Broadcom takes over Qualcomm (US$ 15.4 billion), the company will not be able to surpass Samsung Electronics (US$ 40.3 billion). A huge boom in the memory semiconductor market is expected to widen the gap between the two companies further. However, the takeover can provide Broadcom with an opportunity to become a strong player in the automotive semiconductor market expected to grow rapidly in the future following the wireless LAN and mobile communication chips. Qualcomm acquired NXP which supplies near field communications (NFC) chips last year and Freescale acquired by NXP in 2015 is the first ranker in the automotive semiconductor market. Semiconductors for automobiles are an item that Korean companies regard as a new growth engine.
Samsung Electronics, LG Electronics, and other mobile phone makers in Korea may have to pay different fees for mobile communication chip licenses to Qualcomm.
Korean companies think that there is a low possibility of Broadcom's acquisition of Qualcomm. "I doubt synergies between the two companies, Broadcom’s ability to take over Qualcomm and why Qualcomm is rumored to be sold off. However, this issue can be helpful to resolve a patent dispute between the two companies," an industry official said.