Or, at least, it more or less does in May of 2015. Avago Technologies agreed to buy U.S.-based Broadcom in a deal worth $37 billion — the largest chip deal in the history of technology — as well as take the company’s name (though the stock ticker still remains AVGO). Avago CEO Hock Tan, known as a very aggressive dealmaker, took the first steps toward what would potentially be a consolidation of the fabless semiconductor industry amid a changing technology industry dominated by Apple and Google.
Still, Broadcom would be based in Singapore, which would lead to complications down the line.
“,Image Credits:Martin H. Simon/Bloomberg via Getty Images via PoolIntel, too, would also end up playing a significant role in this story. Just a few months later in December, Intel said it would acquire Altera for $16.7 billion. Altera at the time was known for making what are called Field Programmable Gate Arrays, or FPGA, which is potentially Intel’s answer to the emergence of a new generation of chips geared toward AI operations that are far more efficient than the traditional CPU. Intel at its heart is an x86 shop, but would show up down the line in this scuffle in dramatic fashion.”,Image Credits:Intel /In October 2016, Qualcomm saidu00a0it would buy NXP Semiconductors for $47 billion. It was another step toward an increasingly consolidated semiconductor industry, especially as Qualcomm looked for ways to tap new technologies like autonomous vehicles and other devices that require onboard modems.”,Broadcom made another huge acquisition in November 2016, just a month later, this time buying Brocade for $5.9 billion. Brocade specialized in data and storage networking products, though Broadcom said it would sell the networking business, which would have put it in direct competition with major networking companies like Cisco.
(Robert Gauthier/Los Angeles Times via Getty Images)”,Image Credits:Robert Gauthier (opens in a new window)At the tail end of his tenure, former president Barack Obama blocked a bid by a Chinese firm for semiconductor firm Aixtron, a German company with assets in the United States, in December 2016. It came at the recommendation of the Committee on Foreign Investment in the U.S, or CFIUS, which would end up playing a big part in the Broadcom/Qualcomm deal about a year later.
Nevertheless, it was clear that there was a lot of consolidation brewing in the semi industry — and foreign players were very interested.
(Photo by Bilgin Sasmaz/Anadolu Agency/Getty Images)”,Image Credits:Bilgin Sasmaz/Anadolu AgencyIn January of 2017, Apple filed a $1 billion lawsuit against Qualcomm which basically amounted to overcharging for chips and failing to pay rebates. This battle would go back and forth and become a massive point of contention for Qualcomm, which had a longstanding relationship with Apple — one that clearly wasn’t a very rosy one.
u201cThe reason that weu2019re pursuing this is thatu00a0Qualcommu2018s trying to charge Apple a percentage of the total iPhone value, and they do some really great work around standards-essential patents, but itu2019s one small part of what an iPhone is,u201d Apple CEO Tim Cook said regarding the legal battle on the companyu2019s second-quarter earnings call last year. u201cItu2019s not — it has nothing to do with the display or the Touch ID or a gazillion other innovations that Apple has done. And so we donu2019t think thatu2019s right. And so weu2019re taking a principled stand on it, and we strongly believe weu2019re in the right. And Iu2019m sure they believe that they are, and thatu2019s what courts are for. And weu2019ll let it go with that.u201d
This would be a massive blow to Qualcomm, which relies on smartphone makers to continue to use its hardware. Qualcomm’s shares took a hit as a result of the reports that came out in October last year.
Photo by Justin Sullivan/Getty Images”,Image Credits:Justin SullivanOn November 6, 2017, Broadcom announced it would offer $70 per share for Qualcomm, which at the time amounted to around $130 billion (these prices go up and down). Broadcom would offer Qualcomm shareholders $60 in cash per share, as well as $10 in stock, making it the single-largest deal in technology ever.
It also would pave the way to a massive consolidation of the semiconductor industry, especially as the industry gradually moves toward the implementation of 5G wireless technology. It also offered and opportunity for Tan, the aggressive dealmaker, to come in and look to reshape the U.S.-based chipmaker — and the industry as a whole.
Photo by Justin Sullivan/Getty Images”,Image Credits:Justin SullivanOn February, Broadcom then increased its bid for Qualcomm up to $121 billion. Tan was set on getting the deal done, which would combine two of the largest fabless chip makers into a single unit that could potentially deal with any upcoming moves by Apple or others that would disrupt its business.
Photographer: Simon Dawson/Bloomberg via Getty Images”,Image Credits:Simon Dawson/BloombergFollowing that move, Broadcom cut the offer price for Qualcomm down to around $117 billion. It’s still the largest deal in tech ever, but the two companies clearly had very different ideas of how the sum of Qualcomm and NXP should be value.
Photo: Getty Images/Matejmo”,Image Credits:Matejmo (opens in a new window) / Getty ImagesCiting a regulatory investigation by the CFIUS, Qualcomm said it would delay its shareholder meeting for at least 30 days, just days before it was scheduled to take place in San Diego. You could call the timing either fortuitous or strategic on Qualcomm’s end, but either way, it was a signal of increasing uncertainty over whether the largest deal in tech would actually get done — especially during the Trump administration.
Photo by Ethan Miller/Getty Images”,Image Credits:Ethan Miller / Getty ImagesJust days after the delay of the shareholder meeting, Qualcomm announced that it would be making significant changes to its board of directors — namely that its chairman Paul Jacobs would be stepping down as executive chairman while remaining a director. It also named a new independent director.
It’s a process companies will sometimes run in order to show shareholders that they are ready to make drastic moves in the face of hostile takeovers. Saying it was done with “engagement theater,” Broadcom was ready to take the deal directly to shareholders, which meant Qualcomm had to start doingu00a0something to show its shareholders it could make the argument that Broadcom undervalued it.
Photo: BRENDAN SMIALOWSKI/AFP/Getty Images”,Image Credits:BRENDAN SMIALOWSKI/AFP / Getty ImagesRemember when we mentioned Intel? Here’s where they come back in: shortly after all this, the Wall Street Journal reported that Intel was considering a number of defensive moves to head off BroadQual, including a drastic maneuver that would involve a bid for Broadcom itself.
Intel, looking to maintain a substantial hold in developing technology for mobile devices, clearly saw a huge pending threat from BroadQual, as well as an opportunity to gain ground as Apple and Qualcomm continue to duke it out. Should Broadcom end up acquiring Qualcomm, it might end up altering the calculus of the ecosystem regarding Qualcomm’s battle with Apple.
Photo by David Becker/Getty Images”,Image Credits:David Becker
The massive fight over the fate of Qualcomm, which chipmaker Broadcom seeks to acquire in the largest deal in technology effort, took another dramatic turn this afternoon when the Trump administration said it would block the deal.
The move is another chapter in a long story, a culmination of a lot of consolidation activity in the semiconductor space and months over jockeying over whether or not Broadcom would be able to complete a hostile bid for the U.S. chipmaker. Following an investigation by the CFIUS, BroadQual is officially on hold.
Let’s review the past few years and see how we got here.
