Huawei is a technology company headquartered in China. Broadcom is an American chip-maker with significant operations in Singapore, and Qualcomm is an American chip-maker based in San Diego, California. These three companies have been front and center recently as Broadcom wanted to acquire Qualcomm. If the companies merged, they could become a stronger chip-maker. However, the US Government blocked Broadcom’s acquisition of Qualcomm. This is mainly because the US Government knew that Broadcom would cut Qualcomm’s R&D spending, giving an upper hand to Huawei which is a Chinese company, that is already ahead of the curve when it comes to 5G.
5G is the next generation of technology that will power the telecom industry and mobile internet consumption. Carriers in every country will be upgrading their infrastructure in the coming years to enable 5G in their countries. Huawei is leading 5G development with the most advanced equipment today. Many countries are planning to buy hardware for their infrastructure from Huawei, except the US. The US Government fears having an infrastructure built with Chinese technology. They believe that the Chinese government could use its political influence on the Chinese company and lead to planting spyware on the infrastructure, leading to US information ending up in China. Given the fears of the US Government, they don’t want to adopt 5G just yet. The US would rather wait for American companies to develop the infrastructure without Huawei hardware. The US is also influencing other countries (mainly in the European Union) to avoid using Huawei equipment in their infrastructure.
Broadcom and Qualcomm are American companies with Qualcomm being the one that does a lot of R&D and makes 3G and 4G chips for phones. However, both companies are not doing great and a merger seemed like it could grow the companies and make them stronger. Hence Broadcom put a bid to buy Qualcomm and the future looked good for both the companies. Typically, when an acquisition is proposed, the US Government, specifically CFIUS (Committee on Foreign Investment in US) can step in and intervene if the acquisition affects US national security. In the case of Broadcom buying Qualcomm, there was no question of national security as both companies are American and there is no foreign company involved. But this would mean that as a part of restructuring post-acquisition, Broadcom would decrease money spent by Qualcomm’s R&D team, leading to slower progress. And we have seen that US would not buy 5G infrastructure from Huawei and would not let its allies buy from Huawei either. This means that it really does not want Qualcomm’s R&D spending cut. If this happened, it could hold off upgrading its infrastructure, but would not be able to hold off its allies in staying on old infrastructure. So the US Government blocked the acquisition completely.
This shows that the government could step in on domestic transactions and even cause losses to American corporations for the sake of politics. While technology has typically transcended boundaries, it would be interesting to see how regulations create silos of technology and prevent borderless sharing of technological progress.