In the competition to supply the world's ever-increasing demand for wireless modems, a bid by Broadcom to purchase Qualcomm announced today could result in a major shift in power.
With an offer of $US105 billion ($136.7 billion), plus another $US25 billion ($32.6 billion) to cover net debt), Broadcom's purchase of Qualcomm would be the biggest tech acquisition in history, almost doubling Dell's $US67 billion ($87.2 billion) buyout of EMC back in 2015. But even more importantly, it would position Broadcom as the third largest chipmaker in the world, behind only Intel and Samsung.
Qualcomm is best known for mobile SoCs (systems on a chip) such as the Snapdragon family of processors, which power everything from budget phones to flagship Android devices such as the Galaxy Note8. Qualcomm also owns a number of patents critical to wireless networking, and is the largest manufacturer of smartphone modems, including those found in Apple's iPhones.
Broadcom's unsolicited offer values each share of Qualcomm at $US70 ($91), which would represent a 25 per cent premium over what Qualcomm shares were trading for at the end of last week. However, Broadcom's timing seems like it's trying to take advantage of Qualcomm's recent legal troubles, which include fines by both South Korea and Taiwan for breaking anti-trust laws and multiple legal spats with Apple over the use and licensing of Qualcomm IP in the iPhone.
According to Bloomberg, Qualcomm is preparing to fight back the offer, though in a press release issued by the company today, Qualcomm said it will "assess the proposal in order to pursue the course of action that is in the best interests of Qualcomm shareholders".
Broadcom stated that it will honour its bid whether or not Qualcomm's current deal to buy NXP semiconductors goes through. If Broadcom's acquisition does end up going down, the move could create a new mobile chip powerhouse, as both companies are already listed among the top 10 chipmakers in the world.