It’s the biggest tech takeover ever. Broadcom is offering about $103 BILLION for Qualcomm, its biggest rival. It’s bound to be a big story for months to come and it’s more than just a story for Wall Street types. You may not have heard of either of these two companies, but you use their products every day.
Both Broadcom and Qualcomm supply communications chips to Apple, Samsung, and pretty much every cell phone maker out there. Their pre-made solutions make it possible to bring out new phones faster and more innovatively. They supply processors and video decoders to AT&T, DISH, and most cable box makers. They even create reference designs that take 90% of the work out of creating a new set-top box — Both the TiVo Series 3 and DIRECTV HR20 were supposedly based on Broadcom’s reference designs.
The two companies have been neck-and-neck competitors for well over a decade, and the consumer has benefited. More interestingly, both companies were US-based until fairly recently. Broadcom became part of a larger company in 2016 and its headquarters moved to Singapore, but the company has already said it will once again be US-based if this deal goes through.
Personally I’ve followed both companies for a long time and I’m not sure what to make of this news. I think if these two competitors merge, I’m not sure who will compete against them to drive prices down. They’re already tops in their field and I’m not sure there’s a benefit to consumers. However, having such a massive company based in Southern California is going to drive the US economy forward and keep US-based design dominant in the chip world for years to come.
This is not going to be a deal that closes quickly or easily. There will no doubt be congressional hearings because it’s very likely both companies are military contractors. Unlike the airplane industry which saw consolidation in the last 20 years (with Boeing merging with McDonnell/Douglas) chipmaking is hardly a shrinking industry. There will be a lot of questions asked about why this merger makes sense and those people in our government who still believe in antitrust legislation will no doubt scream over the massive might a combined BroadQualComm would wield in the marketplace.
As for us regular folks on the ground, there’s not much we can do but sit back and wait. Even if this deal does go through, we probably wouldn’t see any effect for five years or more, because chipmaking contracts are signed a long, long time in advance. Broadcom, or Qualcomm, already has the contract to build the GalaxyS15 and iPhone XIII (or whatever they’re going to be called) and no merger is going to change that. However, looking at 2025 and beyond, this deal could be a massive gamechanger for the industry in ways that we can’t even imagine at this point.