— This is the script of CNBC's news report for China's CCTV on March 13, Tuesday.
President Donald Trump killed Broadcom's proposed buyout of Qualcomm, citing national security concerns, according to a statement issued by the White House on Monday.
The statement said, "There is credible evidence that leads me to believe that Broadcom Limited, a limited company organized under the laws of Singapore (Broadcom)...through exercising control of Qualcomm Incorporated (Qualcomm), a Delaware corporation, might take action that threatens to impair the national security of the United States."
Both companies were ordered to immediately abandon the proposed deal. The order, an unusual move by any sitting U.S. president, also prohibits all 15 of Broadcom's proposed candidates for Qualcomm's board from standing for election.
The U.S. Treasury's Committee on Foreign Investment in the United States had already expressed concerns about the transaction in a March 5 letter addressed to Broadcom and Qualcomm lawyers. CFIUS listed several issues, including Broadcom's reputation for cutting research spending and potential national security risks.
Despite CFIUS's concerns, Broadcom had been optimistic that a plan to move its headquarters from Singapore to the U.S. could save the deal.
[Kyle Bass, Founder and Principal, Hayman Capital Management] "The idea of kinda financial gain is not congruent without national security policy and the betterment of our nation in the long run. So when I think about us giving up various technologies in the 5G rollout, is so key to the US national security policy going forward.
I'm not sure if Broadcom had foreseen such a tight regulation from the White House, but why did Broadcom want to buy Qualcomm in the first place? Let's take a look at this chart, which may give you some ideas.
So here's a list of market cap of some major players in the semiconductor industry.You can see, by March 9th, Intel had a market cap of 244.2 billion USD, Broadcom had 104.2 billion, Qualcomm 93.3 billion and NXP Semiconductors had a market cap of 42.5 billion dollars. Buying Qualcomm would make Broadcom the third-largest chipmaker in the world, just behind Intel Corp. and Samsung Electronics Co. The combined business, which could shape up to be the biggest-ever deal in the technology space, would instantly become the default provider of a set of components needed to build each of the more than a billion smartphones sold every year.
So it's apparent that Intel was pretty much threatened by this deal and in order to stop the Boarcomm Broadcom merger, Intel was reportedly considering to acquire Broadcom since late last year, according to Wall Street Journal.
Now, after the annoucement from the White House, Intel can take a short break. However, some see that the trend of "big fish eating small fish" is inevitable despite the bans from the regulators, and the wave of consolidation would probably continue to sweep through the semiconductor industry.
CNBC's Qian Chen, reporting from Singapore.