Industry

Broadcom eyes mega-deal for USA chip rival Qualcomm

Broadcom eyes mega-deal for USA chip rival Qualcomm

With its profits plummeted more than 90 percent in the latest earnings call, Qualcomm could be fighting a losing legal battle with Apple, giving Broadcom the flawless opportunity to acquire the chipmaker in what could be the largest chip business acquisition ever. They closed up 13 percent at $61.81, valuing the company at $91 billion.

Broadcom shares also gained ground on the Nasdaq, rising more than four percent to $271.20, in a possible sign that the market saw merit in the acquisition.

Both Broadcom and Qualcomm have pending deals that could be affected by a merger.

Broadcom Chief Executive Officer Hock Tan is a voracious acquirer, and he's played a key role in a wave of consolidation engulfing the $300 billion semiconductor industry over the last three years. At US$70 a share, an offer would value Qualcomm at US$103 billion. Broadcom, created in 2016 when Avago Technologies Ltd. acquired Broadcom Corp. for $37 billion, has built itself from a former Hewlett Packard division into one of the largest chipmakers via a string of purchases.

Qualcomm's shares have struggled so far this year as the company goes toe-to-toe with Apple in an ongoing legal battle.

Reports in The Wall Street Journal and elsewhere say Apple is contemplating kicking Qualcomm out of its devices entirely, possibly replacing it with Intel chips. The news outlet also noted that the stock of Qualcomm went up 14 percent following the news, which is the largest stock movement for the company in almost a decade. Yesterday it filed a suit against Apple in a California district court claiming that Apple breached its contract with Qualcomm by trying to pass information about Qualcomm's modem chip to other Apple employees who were working with Intel's component.

The proposal raises questions about whether Qualcomm will close its pending US$38-billion acquisition of NXP Semiconductors NV. While Qualcomm has been accused by Apple and some other manufacturers of not licensing its standard essential patents in a fair, and non-discriminatory manner, the company has been on the offensive.


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