If you make a statement that "our intellectual property is not for sale to the Chinese," that would be a lot simpler to do than stopping an American CEO from buying the company run by another American CEO. But it doesn't matter now.
President Trump made a proclamation Monday night that basically banned Singapore's Broadcom Ltd. (AVGO) in its attempts to buy U.S.-headquartered Qualcomm (QCOM) , arguing that he had to prevent intellectual-property theft. This sends the message that U.S. tech isn't for sale to China -- and is stunning and fatal to the Broadcom/Qualcomm saga.
Except left out of the equation is the fact that Broadcom CEO Hock Tan is an American, and that Broadcom is moving back to the United States from Singapore (at Trump's own glowing urging and reception). Tan is originally from Malaysia, but has been a U.S. citizen for more than 20 years. He has worked for Pepsico (PEP) , General Motors (GM) and the late, great Commodore -- yeah, Commodore, the first real PC company, once based outside of Philadelphia.
And Broadcom's headquarters? The company is nominally based in Singapore following a 2016 merger between Avago Technologies and California-based Broadcom Corp. that created Broadcom Ltd. But the firm is really headquartered in San Jose, Calif. -- and in truth, it never left.
Broadcom Ltd. has pretty much always been an American company. Even after the 2016 merger, the combined entity picked the name "Broadcom" rather than "Avago" to better reflect the company's true nature.
Broadcom has been dual-headquartered in name only, like so many other companies that have moved their HQs around to avoid onerous U.S. taxes. the company was created by a so-called "inversion," one of the last that got through the shoot back in 2015.
In fact, it was just on Nov. 2 that Trump praised Tan for moving Broadcom's headquarters to San Jose, where it really was anyway. The move allowed Tan to complete his acquisition of Brocade by being a U.S. company not only in name, but in reality.
The fact is, though, that more than half of Broadcom's revenues come from China. Therefore, one could argue after Trump's presidential decree that if your company does a ton of business with China, it's a Chinese company. And if it's a Chinese company, then it can't buy an American one.
What is this all saying? I think it's all part of a new message that began last week with Trump's new tariffs on foreign aluminum and steel. It says: "China, listen, you aren't going to dump your raw products on America any more. You aren't going to target industries and wipe out American jobs to create Chinese jobs. And you are no longer going to steal our secrets or our intellectual property, either."
The problem is that the Trump administration's vehicles are so strange that their positions do nothing but frighten everyone in business. If Canada buys its steel from China, then that steel can't come here? But if it's made in Canada, then it's fine?
If Broadcom had less than 50% sales in China, would a takeover of Qualcomm -- which would have been the largest tech merger ever -- have been OK? If Tan were born in America and not Asia, would the deal have gone through? Can U.S.-based Intel (INTC) buy Qualcomm? Is Qualcomm now deemed a "precious asset"? Is there even such a designation?
Now, of course, one could argue that all the president was doing with his proclamation was backing up the U.S. Treasury. That department's Committee on Foreign Investments in the United States (known as "CFIUS") had already said "no" to a Broadcom/Qualcomm deal in very strongly worded terms. But somehow, that didn't register with Broadcom as being the end.
The issue now for all American companies and Silicon Valley ones in particular might be very odd: "Do too much business in China and you're a Chinese company."
Now, this might just be one of those situations where "hard cases make bad law," meaning that this was an extreme case and therefore makes for lousy law. But all the same, I think we've now seen the high-water mark for tech takeovers if a tech company does a lot of business in China (and most tech companies do a lot of business in China).
More importantly, China is now an official pariah in both name and deed, whether it's in low tech or high. That this is somehow not rocking the world is pretty incredible, as the free flow of information between our two countries has been pretty much of a given.
Back in August 2005, Chinese oil giant CNOOC tried to buy Unocal but withdrew from bidding because the U.S. congressional backlash was so great. Our natural resources were deemed too precious to allow the Chinese buy them, and some lawmakers said that such an acquisition would be a national security threat. CNOOC's withdrawal allowed Chevron (CVX) to buy Unocal for less money than the Chinese company had offered.
However, Broadcom is neither owned by the Chinese government nor run by someone from China. That said, you get the message: "China, stay out of here! Stay out of here with your money and your thieving ways! The United States is for the United States!"
Didn't know that? You sure do now.