Qualcomm to Go Private?

Article By : Junko Yoshida, EE Times

As Broadcom's takeover bid fades away, Paul Jacobs is looking at ways to fend off future threats by seeking funding to take the company private

What motivates a big corporation to gobble up another big company? Look at the latest Broadcom-Qualcomm saga.

If you are Hock Tan, Broadcom’s CEO, you might be driven by the adrenalin high of financial engineering, and the thrill of an epic conquest.

But for Paul Jacobs, the motivation for buying out Qualcomm must be very personal.

The Financial Times Friday (March 16) reported that Jacobs, Qualcomm’s former chairman and CEO, is seeking the funding necessary for a majority stake in the company his father founded. Jacob’s plan is to take Qualcomm private.

It’s unclear if Jacobs can afford Qualcomm, which has a market capitalization of about $93 billion. The UK newspaper reported that despite the family’s historic link to Qualcomm, Jacobs personally owns less than a tenth of 1 percent of its shares. Irwin Jacobs founded Qualcomm in 1985, and Paul Jacobs was Qualcomm’s chief executive between 2005 and 2014.

Setting aside the personal angle, though, why did Broadcom’s proposed takeover of Qualcomm get so much attention in the electronics industry? And why does Jacobs want to buy out Qualcomm?

Jacobs’ take-private plan illustrates that he sees in Qualcomm a crown jewel that needs to be protected at all costs — whether from foreign companies or competitors. 

On one hand, politicians used China as a reason for blocking the deal. On the other hand, the tech industry is finding an entirely different set of reasons — other than China — to be fearful about the potential merger. Intel, for example, was concerned enough to consider a bid to buy Broadcom.

It’s about RF, stupid!
Among many reasons I’ve heard, the most convincing was the following: Combined, Broadcom and Qualcomm would command a virtual monopoly over RF technology on 5G cell phones.

Claire Troadec, activity leader, RF Electronics at Yole Développement, told us the 5G market is expected to develop different RF front-end (RFFE) paths for each 5G flavor (5G sub-6 GHz, 5G mmWave and 5G IoT).

Of the three paths, Broadcom is most likely to have a lock on RF front-end (RFFE) modules for 5G sub-6 GHz. This is because RFFE for sub-6 GHz 5G will be built on incremental innovation from the current 4G RFFE. Broadcom is already one of the most formidable players in the 3G, 4G RF supply chain.

In contrast, 5G mmWave is expected to throw everyone off the boat. 

This is because 5G mmWave could practically end the current practice of complex System-in-Package (SiP)-based front-end modules used for 2G, 3G, and 4G RF. For 5G mmWave’s RFFE, “You can design every building block — including power amplifiers, low-noise amplifiers, filtering, switching, and passives — based on advanced CMOS or SOI technology,” said Troadec.

This shift from SiP to SoC will open the door to “advanced CMOS design and manufacturing players,” said Troadec. Current players in the cellphone architecture ecosystem — Samsung, Huawei, Mediatek and Qualcomm and Intel — are now motivated to move into the RF market.

Now that Qualcomm is getting traction in the 5G mmWave space while Broadcom is focused on the sub-6-GHz regime, Troadec said that their merger, had it not been blocked by the U.S. president, “would have created a very high monopoly.” She suspects, “This is why we saw Intel getting scared and trying to enter in this discussion as well.”

Of course, the monopoly wouldn’t have been limited to RF. Broadcom/Qualcomm would have ruled everything from Broadcom’s radio to Qualcomm’s apps processors, modems and transceivers.

Broadcom and Qualcomm market shares

(Source: ABI Research)

Stuart Carlaw, chief research Officer at ABI Research, told EE Times that the combined companies would have held a 59 percent share in the Wi-Fi segment, 46 percent in Bluetooth, 67 percent in location chips, and 41 percent in cellular.

In other words, despite political rhetoric about the China factor, the specter of monopoly should have been everyone’s biggest worry. 

— Junko Yoshida, Chief International Correspondent, EE Times

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