Qualcomm, a longtime giant of the computer chip industry that has fallen on hard times, may find itself a takeover target for a fast-rising upstart.
Broadcom, which in just eight years has become a formidable competitor in the semiconductor industry, is weighing a takeover bid for Qualcomm, two people briefed on the matter said Friday.
Should Broadcom decide to pursue a deal, it would be the biggest takeover bid in the semiconductor business to date. As of Friday afternoon, before Bloomberg News reported on Broadcom’s deliberations, Qualcomm had a market valuation of about $81 billion. A bid could have come as soon as this past weekend, said the two people, who spoke on the condition of anonymity because the deliberations were still private.
A spokeswoman for Qualcomm declined to comment, while a representative for Broadcom did not respond to requests for comment.
A merger between Broadcom and Qualcomm would combine a range of semiconductor, computing and networking technologies. But certainly one rationale, analysts say, would be to increase the combined companies’ real estate on smartphones — and perhaps a more secure position in that crucial industry.
Broadcom, they say, may be betting it could reach a peace with Apple, which is pulling away from Qualcomm as a supplier and fighting in court with it over patents.
“It would certainly increase Broadcom’s exposure to wireless, and maybe the company believes it can develop a better relationship with Apple,” said Stacy Rasgon, an analyst for Bernstein Research.
Qualcomm has been grappling with a sagging stock price — it was down 20 percent in the 12 months that ended Thursday — and its legal fight with Apple. Last week, the company sued Apple, accusing the iPhone maker of violating a software license agreement to help out Intel, whose rival modem chips are used in newer iPhones.
And Qualcomm has not yet completed its $38.5 billion takeover of another chip maker, NXP Semiconductors, a transaction meant to help diversify its business away from smartphones. What would happen to that planned takeover if Broadcom acquired Qualcomm was not yet clear.
While Qualcomm has suffered several misfortunes in the last several years, its potential pursuer has enjoyed far better success of late.
Broadcom’s leadership traces itself back to Avago Technologies, a company that went public in 2009. At the time, it was just another small player in the semiconductor industry, worth $3.5 billion. But it has embarked on a breathtaking acquisition spree since then, driven by the soaring ambitions of its chief executive, Hock Tan, and backed by the big investment firm Silver Lake Partners.
Two years ago, Avago struck its biggest deal to date by buying Broadcom, whose chips are used in smartphones and networking devices, for $37 billion. Tan’s company adopted its target’s name — and did little to hide its desire to hunt even bigger game.
Despite Tan’s well-known dislike for the spotlight, Broadcom took a big step into prominence Thursday when he appeared with President Donald Trump at the White House to announce that the company would move its legal base to the United States.
Broadcom, which has long maintained a headquarters in Singapore for tax reasons, as well as in San Jose, California, said the move was inspired in part by Republicans’ efforts to overhaul the U.S. tax code. The return to the U.S., Tan said, would shift $20 billion in revenue back to the United States, making it subject to corporate taxes in the United States. The administration’s tax proposal would cut corporate tax rates sharply, to 20 percent, from a nominal 35 percent.
The plans led Trump to praise Broadcom as “one of the really great, great companies.”
But Broadcom executives stressed that the move was not dependent on the passage of tax legislation.
A different policy consideration, analysts say, is the prime motivation.
“This is all about freeing up Broadcom to make acquisitions,” said Romit Shah, an analyst for Nomura Instinet. “And Qualcomm has been at the top of Broadcom’s wish list for a long time.”
The hurdle that Broadcom has faced as a foreign-based company is apparent in the trouble it has encountered with its pending purchase of Brocade Communications Systems, announced in November 2016 at $5.5 billion.
That deal has been delayed three times by issues that cropped up during the review by the Committee on Foreign Investment in the United States. That government body scrutinizes bids by overseas companies to buy American corporations that control technology that may be deemed strategic for either economic or national-security reasons.
Broadcom traces its origins back to 1961, as the semiconductor unit of Hewlett-Packard. Its corporate history is largely a chronology of deals. HP spun off its chip and test-equipment business as Agilent Technology in 1999.
In 2005, the buyout firms KKR and Silver Lake bought much of Agilent’s operations and named the new unit Avago Technologies. A string of deals followed until Avago bought the much-larger Broadcom in 2015.
Qualcomm, founded in 1985, has a heritage of science and engineering. Its founders were led by Irwin M. Jacobs, a professor at the University of California, San Diego. The company, which is based in San Diego, was a pioneer in mobile communications, including satellite-tracking and messaging technology used by long-haul trucking companies.
Later, Qualcomm developed the chip sets used for the basic radio communications in mobile phones, and its technology gave Qualcomm a leading position, protected by a thicket of patents.
