Just because Trump blocked Broadcom's plans doesn't automatically mean that the United States will have a lead over China when it comes to 5G.
The decision by President Donald Trump to scuttle a hostile takeover by Singapore's Broadcom of the USA chipmaker Qualcomm caught some on Wall Street off guard. The committee also said that the technology of Qualcomm-which makes wireless chips and licenses wireless patents crucial to smartphones and other-was too important to put into the hands of a foreign company with links to China.
The Committee on Foreign Investment (CFIUS) has said that it is anxious that Broadcom would slash research and development at Qualcomm.
Steve Mollenkopf, Qualcomm's CEO, speaks during his keynote address at CES in Las Vegas.
The presidential order reflected a calculation that the US' lead in creating technology and setting standards for the next generation of mobile cell phone communications would be lost to China if Singapore-based Broadcom took over US-based Qualcomm, according to a White House official.
The deal would have created the world's number three semiconductor company with a leading market share in smartphones, vehicle electronics and industrial internet devices.
Analysts said Broadcom can still build heft through smaller deals. And it could have an easier time buying US targets if it goes through with plans to redomicilie in the United States.
Tan has already turned Avago, a small chipmaker with a market value of US$3.5 billion in 2009, into a more than US$100 billion company.
While Broadcom is a Singapore-based company, the USA panel that vets foreign deals said that the bid could have had implications for the U.S.'s broader technological competition with China. "Underpinning that is concern about China's growing competitiveness in areas such as 5G and artificial intelligence, which are set to become increasingly important in the next few years", the publication reported.
A man walks past a Qualcomm stand while attending the Mobile World Congress in Barcelona.
Broadcom has ample firepower for smaller deals, with about US$11 billion in cash and the potential to generate almost US$9 billion in annual free cash flow, analysts estimate.
The order came despite Broadcom´s assurances that it would complete its move to the United States by early April, ahead of a previously-planned Qualcomm shareholder vote on the $117 billion deal - meaning any national security concerns were moot.
Others have said Trump's decision was more about competitiveness than security concerns.
"But that really hinges on completely severing the foreign ownership connection", he said.