Credit Mike Blake/Reuters
Qualcomm has slain a lion, but baited a dragon. Having the United States government essentially declare the firm a national champion allowed the chip maker to defend itself from rival Broadcom’s $117 billion takeover bid. But a rise in anti-foreign sentiment may hurt Qualcomm, too — since it’s still waiting for China to approve its own $44 billion acquisition of NXP Semiconductors.
Qualcomm’s plans for growth lean heavily on acquiring the chip maker. Sealing the deal would reduce its dependence on the stagnating mobile-phone market and expand exposure to faster-growing ones such as autonomous vehicles. The problem is it needs approval from China’s Ministry of Commerce, and that approval has been slow in arriving.
The United States government has derailed multiple chip deals because of fears that American technology might fall into Chinese hands. Broadcom might not appear to fall into the same camp. It is based in Singapore — and plans to relocate stateside this year — and most of its shareholders and directors are American.
Yet fear of the Middle Kingdom played a role: Lawmakers wondered whether Broadcom would follow its playbook on other deals and cut Qualcomm’s research and development. That would risk ceding wireless-technology leadership to Chinese firms like Huawei. The Committee on Foreign Investment in the United States was also concerned about Broadcom’s business relationships with “foreign entities” when it assessed the bid for Qualcomm.
The decision to rule Qualcomm off limits to foreign ownership could also grease the way for other sectors to be declared too sensitive for Chinese ownership.
Beijing has already come down hard on Qualcomm, fining it $975 million in 2015 for what it called anti-competitive practices. The company could now find itself caught in the middle of escalating tensions. If there are suspicions in the Ministry of Commerce that Qualcomm stoked anti-Chinese sentiment among United States lawmakers to defend itself against Broadcom, the company may have a target painted on its back.