Deal to buy Qualcomm raises jitters

Five Chinese companies, which together control over half of the country’s smartphone market, expressed their concern on Thursday over chipmaker Broadcom Ltd’s $105 billion proposal to buy Qualcomm Inc, saying they don’t want to see such a change as they prepare for 5G-ready smartphones.

The remarks were made at the same conference in Beijing where Qualcomm forecast that its revenue from Chinese device-makers, which use its chips and components, will hit $8 billion in 2019. That represents a compound annual growth rate of 17 percent from 2017 to 2019.

Also on Thursday, the United States chip giant inked $2 billion in MoU with Xiaomi, Oppo, Vivo, and Lenovo, in which they promised to buy more of Qualcomm’s components over the next three years. The components make it easier for mobile phone antennae to be used with 5G connections. The move is part of Qualcomm’s broader push to deepen ties with these smartphones vendors, in hope of launching super-speed 5G devices as early as next year.

The presidents and CEOs of the above companies and ZTE, another Chinese smartphone vendor, all voiced their objections to Broadcom’s proposal to buy Qualcomm, which is the largest-ever takeover in the technology sector and would create a $200-billion-plus semiconductor behemoth.

Lin Bin, president of Xiaomi, said he worries that Qualcomm won’t come up with new innovative technologies once the deal goes through. The Beijing-based company has been using Qualcomm’s processors in most of its flagship smartphones.

Chen Mingyong, CEO of Oppo, the second-largest smartphone player in China, expressed similar concerns: “It is highly likely to cause a monopoly and unfair competition. More importantly, I don’t think the deal is good for long-term growth. It is more like a move designed to pursue short-term interests.”

Shen Wei, CEO of Vivo, said the deal will bring considerable uncertainties: “We have been cooperating with Qualcomm for more than 10 years. We don’t want to see any change to that.”

The senior executives’ comments came as Qualcomm is caught up with more troubles in Europe and the US. On Wednesday, European regulators hit Qualcomm with a 997million-euro ($1.2 billion) fine for abusing its market dominance. For the past year, the company has been locked in numerous court battles with Apple, a major client.