The chipmaker that's threatening to replace six of Qualcomm's directors to facilitate a takeover has a reputation for forcing abrupt price increases with its customers, including Amazon, Hewlett Packard Enterprise and Seagate, among others, according to people familiar with the matter.
Tactics used by Broadcom include ripping up existing contracts and demanding higher prices for chips while threatening to cut off supply if companies refuse to agree, said the people, who asked not to be named because the negotiations are private. Broadcom has also convinced customers to sign contracts that install the company as an exclusive provider of chips. Those steps funnel money away from rivals that make similar replacement products, the people said.
The U.S. Federal Trade Commission has already launched an antitrust investigation into Broadcom's anticompetitive maneuvers, the Wall Street Journal reported in January. But the details of Broadcom's tactics have been unclear. In December CNBC reported that Google and Microsoft had concerns about a Broadcom-Qualcomm combination.
Broadcom's CEO Hock Tan is the mastermind behind the aggressive pricing, which one person who has had to negotiate with him likened to "extortion." Tan has long had a reputation for cutting costs and focusing on chips with favorable profit margins.
Broadcom declined comment.